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Waking Up Europe
A couple of years ago, EURSOC published an article warning that the high-tech restructuring of the global economy could wash away the "rigid, high cost, no-growth" economies of Europe.
A disruptive age was coming, which could see the entire business world cast anew.
Amid today's banking crisis, we believe this still holds true.
Successive economic shocks have shaken economic systems and given birth to new models. The 1929 crash was the death rattle of old Industrial Revolution era economies; it took some years (and a war) before the 1940s and 50s heralded a boom in domestic goods. The 1970s saw a realisation that ordered economies of the 1960s had outlived their usefulness. The era of the microchip had dawned, and with it a new way of looking at business. The Reagan and Thatcher free market revolutions followed and despite ups and downs, the economic benefits were felt long after the Baroness and the 40th President had left the political stage.
The nationalisation of banks, unprecedented government bailouts and demands for more regulation appear to signal that this era, too, is coming to an end (at least, if you believe the wishful thinking in the left-wing papers, or the wailing and gnashing of teeth in the right-wing press).
What will the new era look like? Casting our minds back to the EURSOC story of three years ago, it seemed that less, rather than more regulation was the key, combined with a strong belief in new technology.
What's on the drawing board in 2008? Internet technology, still in its relative infancy, has redefined much of the business world in the west. Newspapers are finding at last that money can be made from advertising online, while "bricks and mortar" shops continue to make the switch to digital. The web has revolutionised the buying of everything from insurance to healthcare, holidays to the weekly food shop. Combined with video, social networking and personalisation - again, still in their infancy despite the number of household names around today - and people have the possibility to create businesses with truly global reach.
The web can be transparent, too. It's talent-transparent, in that a good idea can be launched with a relatively small investment, and if it's good, it'll float. Larger companies struggle to compete with nimble startups launched by kids often just out of college. Tracking shows businesses who is reading or buying what, and decisions can be implemented quickly to react to changing consumer behavior.
A look around the web today - the new apps that appear on Facebook every day, the videos reaching global audiences of millions on YouTube, the tools produced by supporters of the US presidential candidates to reach voters - and it is easy to believe that we're looking at one of our most creative periods. Hundreds of thousands of people are producing media, millions are watching and interacting. It's an activity unparalleled in history.
Mainstream business has misunderstood much of the impact of the internet: It's been interested in IPOs and mergers (plenty of web startups got this too, launching with little more than the hope of a big old player buying a megastake).
With finance on its uppers, online business and new technology are among the only options remaining in the west, at least until China relaxes its grip on the internet to free the creativity of its youngsters.
Even this can be threatened, however. We quoted Paul Kennedy's "Rise and Fall of the Great Powers" last month to illustrate how some nations' declines are matched by the rise of others: "In 1736, just as Abraham Darby's ironworks at Coalbrookdale were beginning to burn, the blast furnaces and coke ovens of Honan and Hopei were abandoned entirely. They had been great before the Conqueror had landed at Hastings. Now they would not resume production before the 20th century."
Could Europe harm its nascent new technology industry? It seems entirely possible. France, which is leading calls for Europe-wide regulation following the 2008 crash, is an interesting example.
With old media companies such as television and newspapers struggling, their bosses have been eyeing the success of new media startups jealously. It just so happens that these bosses are very close allies of the President, Nicolas Sarkozy. Successive French governments have for years propped up the press with subsidies, but the latest wheeze for funding old media, announced this year, is to tax new media in order to subsidise the old.
And, if these French newspaper and broadcasters follow the model of every other newspaper and broadcaster around the world, what will they invest this subsidy in? Why, new media operations, of course. Leaving French startups in the unenviable position of funding their big, mainstream media competitors.
That said, creating a business in France, new media or not, is no picnic. Your correspondent bought a bundle of domain names (.coms and so on) this morning for a new project. Of course, it is impossible to buy a .fr domain in France via the usual channels: One must plough through the website of the French regulator first (which includes a handy 29-page set of rules) before being directed to one of the approved (or even non-approved) registers, who will then approach the regulator to see if your request fulfills state requirements, and who will get back to you quickly to approve the domain and host it on their servers.
Note that two years ago, the EU joined Iran, China and Cuba in calling for Domain Name System to be wrested from US control. The EU's apologists said it should be hosted by a multinational body, though it is safe to say that Tehran and Beijing may have had other ideas.
Former Swedish prime minister Carl Bildt made an impassioned plea for the EU to reconsider.
"This is not where Europe should be on these issues", he wrote, "The Internet is vital to our future, and we Europeans should be as keen as anyone to preserve the essence of a system that has worked amazingly well. If that entails leaving some ultimate safeguard powers in the hands of the United States, that's certainly better than having theocrats or autocrats around the world getting their hands on the levers of control."
Forward looking European leaders had to react, he said, "Otherwise they might endanger one of the most powerful instruments of freedom and prosperity in our time."
As for the what lies on the other side of the crisis, little is clear. Some see light at the end of the tunnel; others say that the lights belong to a fast-approaching train coming from the other direction. It's fair to assume, though, that we won't necessarily emerge chastened, having learned that our previous habits are wasteful and unsustainable, as some left-green commentators, already painting themselves with woad, are claiming. Every crash in the past century has seen western economies bounce back on a new wave of technological innovation and consumer spending. The danger from this recession is that western leaders regulate away the very means of our recovery.
