The article, authored by Conor Gallagher via NakedCapitalism.com, discusses economist Mario Draghi’s efforts to transform Europe into a neoliberal paradise for the financial class. Draghi, a former Goldman Sachs executive and European Central Bank president, is now working alongside European Commission President Ursula von der Leyen to push forward an agenda that prioritizes competitiveness at the cost of democracy and labor rights. This transformation is evident in Draghi’s recent report titled “EU Competitiveness: Looking Ahead,” which aligns with Ursula’s goals and promotes policies that benefit the financial-political elite.
The article highlights the EU’s focus on competitiveness, which, in reality, translates to more concentration of power and resources in the hands of large firms. Draghi’s prescription for competitiveness involves aligning EU regulations with American interests, leading to increased dominance of US companies in Europe. This trend is exemplified by the surge in cross-border mergers and acquisitions by US firms in Europe, driven by favorable valuations and lower costs associated with labor and operational expenses.
The article also points out the detrimental impact of this strategy, with European companies increasingly becoming acquisition targets for US private equity firms. Examples include the destruction of UK’s fourth-largest supermarket chain by Clayton Dubilier & Rice and the takeover of Germany’s Techem by US asset manager TPG. This trend raises concerns about the erosion of European autonomy and the potential exploitation of European assets by US firms.
Overall, the article warns against the EU’s push towards neoliberal policies that prioritize competitiveness over democratic values and labor rights, ultimately aligning the region more closely with the US at the expense of its own sovereignty. In some months, as many as one third of the businesses that have been sold have gone to US buyers. Guarding against China and Russia while allowing the US to dominate Europe is seen as beneficial for “de-risking” from China and Russia, but this may not be advantageous for the people living in the EU. Take the case of TIM in Italy, which has already sold off its fixed line network and plans to sell more assets soon. Telecom is a sector that Draghi is focusing on, pointing out the need for consolidation. However, the idea that the EU needs consolidation, led by US firms, to be more competitive raises the question – competitive for whom?
Italy has a highly competitive telecom market, offering full-fiber landline services with unlimited internet for as low as €20 to €25, a fraction of what US consumers pay. Would a telecom giant with a monopoly in the US and Europe be more competitive against Chinese companies in terms of profits or company value? Perhaps, but it may not necessarily lead to technological supremacy.
The story of TIM serves as a cautionary tale. The company, which used to employ 120,000 people, saw its downfall after Italy came under EU control and Telecom Italia was privatized three decades ago. The process of US firms taking over European companies continues, with upcoming austerity measures in the EU likely to exacerbate the situation.
The Draghi report emphasizes the need for less labor laws for “innovative” companies, free rein for AI and tech startups, and less sovereignty in order to accelerate technology adoption in Europe. However, the regulatory barriers and fragmented national systems in the EU may hinder innovation and growth, putting EU companies at a disadvantage compared to the US and China. The report suggests that the lack of a true Single Market in the EU prevents companies from reaching sufficient size to adopt advanced technologies, leading to fewer small and medium-sized companies in the EU compared to the US. The adoption of AI is facilitated by the size of companies, allowing them to spread high fixed costs over greater revenues, benefit from skilled management for organizational changes, and use larger data sets for more productive AI deployment. A fragmented Single Market in the EU puts companies at a disadvantage in terms of adoption speed. To address barriers to growth and innovation, a better financing environment is needed to support disruptive innovation, start-ups, and scale-ups in European markets. Additionally, Europe must learn from the impact of hyper-globalization and prioritize AI to prevent falling further behind in productivity compared to the US. Overhauling education and skills investment is crucial to address emerging skill shortages and ensure workers are equipped for the changing labor landscape. However, the focus on competitiveness and productivity in the Draghi report may overlook the potential downsides of emulating the US model, such as wealth inequality.
Ursula, Draghi, and capital view lower wages, a more flexible workforce (preferably machine), more private equity, more privatization, more asset-price bubbles, and more over-indebtedness for the bottom 90 percent as signs of being uncompetitive. The solutions they propose are on the horizon.
In places like Italy, this process has been unfolding for decades, slowly dismantling the post-WWII structures that were built with the help of the communist party and trade unions.
The silver lining is that this tear down process is typically gradual (despite the increasing frequency of crises). The EU navigates through layers of bureaucracy and negotiations with national governments, contending with the remnants of unions. This provides an opportunity to stop the advance of financialization and change course. However, the downside is akin to boiling a frog – the decline in quality of life may go unnoticed until it’s too late.
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