The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.
Which is an excellent introduction to this piece on asymco.com by Horace Dediu: The Policymaker’s Dilemma
Europe has failed to generate growth on the basis of ICT. The reasons are that the rate of change in ICT is rapid and getting more so. If European businesses require intervention, support or other forms of assistance in terms of policy, the time for that coordination to take effect is longer than the cycle time of disruption.
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Almost all growth has come from companies that entered the space. Google, Amazon, Apple and Facebook and even Microsoft came into positions of power from outside the industries they entered. Policy tends to offer means of sustaining incumbents or finding “logical” or defensible entrants. I should mention that the problem of industrial policy failing is not unique to Europe. Japan and to a lesser degree Korea are also facing crises of innovation due to policies designed to sustain rather than disrupt.
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It’s understandable given the need to justify spending other people’s money. No policy maker wants to spend it recklessly. However, the process of unforeseen growth is, well, unforeseeable. It cannot be predicted and it’s very likely to come from somewhere other than where you expect it.This quickly becomes a lengthy discussion, but fundamentally the innovation process is chaotic. It’s very similar to the process of artistic creation. The crisis in innovation comes from not having sufficient chaos. If Europe wants to preserve, sustain, nurture, and maintain it will do so at the expense of creative destruction. Nobody likes chaos but everybody wants innovation. Unfortunately they are concurrent things.
Agility is definitely the issue. The ‘time to coordinate’ is the most valid quote in the story above. By the time there has been a thoughtful process, by the time the checks are made and the process verified, chances are the market has moved on. Being too slow is one killer in this industry.
That, and EU insistence on state aid rules. If you want the EU to win on a global platform, strip back state aid restrictions. These are rules which prevent EU members from competing “unfairly” against each other. While richer regions might bask in the expenditure of taxes in useful ways, those people in poorer regions would struggle. The way to deal with the inequity of resource in the EU was to restrict those who could excel.
Other regions, like the US, like Israel, do not have the same restrictions and their industries are eating our lunch. You have to ask what the function of state aid restrictions is? Here they are just used to provide reasons not to give aid to anyone other than well-established incumbents. These other regions are able to fund who they want, without restriction. If they see a need to be in an industry, they buy their way in whether that’s by offering lucrative grants or lucrative visa packages (one of our Scandinavia neighbours offers funding for film development of over !00%.)
This is the problem with unintended consequences. I’m sure there are great reasons for the rules but the unintended consequence is the situation you now realise we have to fix. You can’t talk about EU failure while condemning the individual members to be less competitive than other regions. Relax rules, let the dice fall where they may and reap the winners.
Does the EU want to compete or just be in the competition?