Europe cannot afford to miss out on the new technological revolutions.
Europe’s Technological Awakening: A Call to Action
The Draghi report, published on September 9, 2024, serves as a wake-up call for Europe’s urgent need for technological advancement. Several indicators highlight the pressing nature of this challenge. Firstly, the gap in living standards, measured by GDP per capita, between the Eurozone and the United States, which had narrowed during the “thirty glorious years,” has significantly widened since the 1990s, reaching its 1970 level. Secondly, while Europe was the birthplace of the first technological revolution with the steam engine, the United States is now the center of disruptive innovations in high-tech sectors such as biotechnology and information technology. Meanwhile, Europe’s innovation is largely confined to incremental improvements in traditional sectors like household appliances and automobiles.
The Shift in Innovation Leadership
What accounts for this reversal? The explanation lies in the fact that during the “thirty glorious years,” France and its European neighbors pursued policies that favored growth based on imitation and capital accumulation. This catch-up growth was largely supported by the Marshall Plan, which enabled European countries to rebuild their productive capital – equipment, factories, and machinery – that had been damaged by the war. Furthermore, educational systems promoted the diffusion of new technological waves, such as electricity and the combustion engine, as well as innovative production methods like Fordism, which originated in the United States in the 1920s.
The Limits of Imitation and Capital Accumulation
However, there comes a point when capital accumulation and imitation exhaust their potential as drivers of growth. On one hand, there are the diminishing returns to capital: the larger the stock of capital, the less each unit of capital added to that stock increases production. On the other hand, once a country has sufficiently approached the technological frontier – the most advanced level of development – imitating that frontier no longer yields significant progress. It is then up to innovation, particularly disruptive innovation, to take over as the primary engine of growth.
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