The European Union does not need a new treaty or powers. It just needs a single-minded focus on one goal: economic prosperity.
This article argues that most, if not all, goals we may have as a society in Europe, including the less well quantifiable ones like social and environmental responsibility, are conditioned on one thing - economic prosperity. It then goes on to illustrate how far divorced from this goal have we really gotten.
To achieve this prosperity, we need to return the Union back to its original intent, as a federal body dedicated to economic development through a common and free market. The neglect of that purpose has been overwhelming. The European Union currently pursues a long list of goals, including (as given by the Commissioner titles): promoting the ‘European way of life,’ ‘health and animal welfare’, ‘environment, water resilience and a competitive circular economy’, ‘intergenerational fairness, youth, culture and sport’ or ‘social rights and skills, quality jobs and preparedness’. Meanwhile, the internal market has become so fragmented that, according to recent IMF analysis , internal trade barriers are equivalent to a 44 percent tariff on goods and 110 percent on services.
A recent study shows that GDPR reduced European Union technology venture investment by 26 percent relative to the US. 10 The AI Act follows the same logic, imposing technical requirements for market access on an emerging technology before Europe has even created one major AI company.
In order to achieve everything else, our proposal is that the European Union concentrate on its core function – prosperity – for the foreseeable future. Other projects are and should still be possible, but, to quote Mario Draghi, they “would be built through coalitions of willing people around shared strategic interests, recognizing that the diverse strengths that exist in Europe do not require all countries to advance at the same pace.”
We can take six practical steps now to reorient Europe towards prosperity. At a minimum, we must: enforce the internal market rules, stop directives from fragmenting it in the name of ‘harmonization’, facilitate the growth of entrepreneurial firms, focus the union on its priorities and limit the excessive flow of legislation without regard to cost.
The situation is quite critical, as Europeans we carefully, and what seems as quite intentionally, maneuvered ourselves to a position from where it will be hard to economically compete with the US and Asia. What we still have are remnants of bygone eras, and the efforts to set the course straight are lackluster. We do not have the time to procrastinate on this.
It is essential that this time the European Union gets it right and creates a regime that is truly comprehensive and appealing for businesses that want to scale up across Europe, and for venture capital that wants to invest, and crucially, exit, in Europe. […] The US demonstrated the power of this solution when it allowed companies to bypass state securities laws by being regulated at the federal level – late-stage firms became four times more likely to attract out-of-state investors.
[…] the European Union fails at submitting new rules to a rigorous analysis of their costs and benefits. The Commission does have the duty to run an initial cost and benefits analysis of draft legislation. However, the Parliament and the Council, when they rewrite the law, often in private meetings (called ‘Trilogues’), are not required to check the costs and benefits of their own changes. This loophole leads to duplicative and often inconsistent legislation. Political deals get made without anyone knowing their true cost. This allows politicians to avoid confronting the cost that new rules imposed on citizens and businesses.
To fix this, we need to make cost-benefit analysis (in European Union parlance ‘Impact Assessment’) an integral part of the entire process. First, the Parliament and the Council must each set up their own independent teams of experts to assess the impact of new laws. Second, a new rule must require them to use these teams. Whenever a change is proposed to a law that alters its purpose, key terms, or costs, the team must produce a short, public report on the effects. This report must be available before a final deal is made, so that everyone is working with up-to-date information. This last change can deliver two benefits. Laws that state their costs and benefits strengthen democracy: voters and representatives can judge the trade-offs.
There is another relevant opinion that deals with labor laws specifically that appeared in The Economist recently:
[…] the sheer difficulty of shedding staff en masse—a reality of corporate life—steers Europe’s biggest companies away from making risky bets in innovative fields. In particular, investments in disruptive breakthroughs (think of the kinds of whizzy products that mostly come out of Silicon Valley, from artificial-intelligence models to driverless cars) require the ability for big companies to hire lots of staff, then later fire most of them if the projects don’t pan out. High restructuring costs in Europe make such investments unviable—with a catastrophic knock-on impact on the continent’s economy. […] An American firm shedding workers will incur costs equivalent to paying those sacked for seven months and be done with it. In Germany costs amount to 31 months of wages for each employee let go; in France 38 months. Beyond severance pay and sops to keep unions happy, the biggest expense is firms keeping unproductive workers on their books they would rather be rid of. New investments are delayed for years as dismissed employees are gradually replaced.
You don’t need to be a politician or an economist to know that sometimes the right thing to do is to do the thing you do not want to do. This holds for personal as much as economic growth. Do we (I am looking at you old people in power!) have balls to do it?