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Europe's tech industry is lagging behind the US – nevertheless it gives the continent the prospect to set the principles of the sport

Europe invests rather a lot in research and publishes and patents many ideas. But it doesn’t compete with the US and China in transferring its innovation efforts to large, global technology firms. These are the seven largest US technology firms, Alphabet (Google), Amazon, Apple, Meta, Microsoft, Nvidia and Tesla 20 times larger than the seven largest within the EU and generate greater than ten times more revenue.

That doesn't mean Europe doesn't have technology Success stories. The world's leading music streaming provider is Spotify, a Swedish company. The Dutch company ASML produces essentially the most advanced on the earth Computer chips and the Danish drugmaker Novo Nordisk leading the extremely profitable marketplace for weight reduction drugs.

European start-ups are literally one too higher deal for enterprise capitalists on average than US ones. But they rarely turn into major global players. The primary reason for that is that Europe regulates more.

Research has shown that that is the case with Europeans less optimistic than Americans want about social mobility Redistribute income greater than within the USA and have a more cautious relationship with it Owning dangerous assets. This results in some very predictable results. Environmental, inequality and life expectancy metrics perform higher in Europe, while the US performs higher on purely economic indicators.

That's not necessarily bad news. In the race to define the principles of the technological game, the mixture of the vast U.S. tech ecosystem and Europe's obsession with regulation may very well be the perfect likelihood to guard consumers, freedom of expression, accountability and transparency all over the world.

Europe has the prospect to shape the worldwide rules for the tech industry in accordance with its own values.

The global leader in regulation

The US Food and Drug Administration (FDA) is to speed up faster its approval of latest medicines because the European Medicines Agency. Pharmaceutical firms are also granted greater profits: on average, drugs cost more within the USA thrice costlier than in the remainder of the OECD.

It subsequently is smart for pharmaceutical firms to initially develop their products within the USA. The same applies if you need to develop a brand new synthetic meat, a modified crop or a product linked to artificial intelligence (AI).

Europe could grow faster if it changes its model. But ask European leaders what exact regulations they would love to see relaxed and you’ll hear deafening silence.

Britain is maybe the perfect example. A big a part of the Brexit project was to simplify European rules that were perceived as excessive. However, eight years after the referendum and government, the UK has yet to make any major regulatory changes shows no interest in changing course.

In the US, innovation went hand in hand Market concentration and market power. When firms have high market power, they could have fewer incentives to innovate. They also start to realize weight political force.

Various app icons representing some of the major major technology companies in the US including Meta, Amazon, Apple, Netflix and Twitter, as seen on an iPhone screen.
The US is home to tech giants equivalent to Alphabet, Amazon, Apple and Meta.
Tada Images/Shutterstock

Europe's role as an independent regulatory authority may be very vital here. The largest firms are likely to adhere to EU law because they wish to retain access to the EU. They also are likely to offer the identical products all around the world, meaning that European rules apply to everyone.

European rules have clear goals. Those of the EU Digital Markets Actwhich comes into force in March 2024 will lay down rights and rules for big online platforms – so-called “Gatekeeper” like Google, Amazon or Meta – to stop them from abusing their market power.

Europe also has credibility in relation to protecting consumers, residents and transparency. There might be no suspicion of favoring European technology champions, because there are not any such champions. Europe can, for instance Judge Tiktok based on whether it violates child protection regulations, reasonably than based on fears of a Chinese company taking market share away from a European company.

Technology and democracy

Perhaps the perfect example of the benefits of old regulatory Europe and unfettered America is the present race for AI. The US is a market leader in AI technology, which may power products and applications equivalent to image generators, voice assistants and serps. About half of the world's investments in AI are currently within the USA.

At the identical time, Europe has already taken several steps towards regulation. Those of the EU Artificial Intelligence Actfor instance, defined different levels the transparency and testing of algorithms depending on how dangerous they might turn into.

Europe will definitely not win the worldwide AI innovation race. But it has the prospect Write the worldwide rules in accordance with his own values. This means firms might be held accountable for the impact of their AI tools and supply transparency in regards to the data used for his or her training. This also signifies that an organization's AI algorithms might be audited.

TikTok app logo on a smartphone screen and flags of China and the United States.
The short video hosting service TikTok is owned by the Chinese company ByteDance.

But for the EU to set the brand new rules for AI, Western firms must win the innovation race. Its primary competitor is China, where firms have massive access to government data, including facial recognition. The Chinese government can largely select his champions by deciding who gets access to the info.

China's regulatory concerns couldn't be farther from Europe's. China will not be interested by improving transparency and fair political competition – it wants to make use of data to drive the country's policies Chinese Communist Partyand discipline and promotion of the national economy.

Far from a contest between Europe and the US for technology supremacy, Western democracies should see their different approaches as a novel opportunity to advertise their shared values. In this context, the absence of enormous, global European technology leaders could actually be a blessing.


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