Europe's "competitiveness" problem
European leaders risk increasing inequalities by turbo-charging failed models
Welcome to The Counterbalance, the newsletter of the Balanced Economy Project.
Leaders across Europe are preoccupied with finding a new economic model to help address global challenges, amid sharpening geo-political rivalries and fears of growing dependencies on dominant U.S. or Chinese firms. But is the EU going to fall prey to the failed ideological assumptions bound up in the ‘competitiveness agenda’?
In partnership with LobbyControl and Rebalance Now, we have just published a report that summarises two conflicting visions for Europe’s future - a public-interest vision, and a vested-interest vision. In the debates about European economic models, the latter versions seems to be gaining a worrying amount of traction. If that vision wins the day, the outcomes could be damaging enough to tear Europe apart.
This edition also explores several other of our other recent articles and outputs.
European leaders risk increasing inequalities with failed “competitiveness” models
Today Mario Draghi, a former head of the European Central Bank, is expected to present an agenda-setting report on “European competitiveness” to members of the European parliament. (We expect his report to be published next week.) Presidents, prime ministers and finance ministers all offer strong opinions about how to improve it. Ursula von der Leyen, recently re-elected as President of the European Commission, mentioned competitiveness over 30 times when laying out her platform in July. The European Council is pushing for a “new European competitiveness deal;” we are promised a new “Competitiveness Fund”.
Unfortunately “competitiveness” is, as we’ve said before, a notoriously incoherent framework for designing policy or understanding the world.
On one level, this c-word confuses competition between private actors in markets with “competition” between states or regions, a very different set of processes. (To illustrate how different, ponder the difference between a failed company and a failed state.) It also poses the question: who is competing, how, and for what benefit?
Monopolists, multinationals, vested interests and lobbyists are exploiting this incoherence to impose their interpretation: that Europe must transfer resources from other parts of the economy to help them compete globally. Those transfers might happen through tax cuts, relaxing financial regulations, removing consumer or environmental protections, or weakening competition policy to allow further monopolisation and the emergence of “European Champions”.
The collateral damage from this model is immense.
So we have two competing visions, battling for supremacy: a public-interest vision, and a vested-interest vision. As our briefing explains:
a “competitiveness agenda” focused on helping special interests will exacerbate dangerous market concentration, boost inequality and public anger, and provoke a race to the bottom between states in key areas such as tax, environmental policy, labour standards or financial stability.
It will also promote rent-seeking which, by raising prices and reducing quality, will harm Europe’s economy.
A competitiveness focus also means Europe is led by policy choices in other regions, rather than based on what Europe’s people need.
Our other recent outputs
Food giants are strangling Britain’s farmers and consumers. What’s the solution? Break them up - The Guardian
This article accompanied our recent report Breaking up the Giants of Harm, about why we should break up dominant firms in sectors ranging from Big Tech to pharmaceuticals to finance to agriculture. A LinkedIn piece following the announced and (mostly approved) merger between food giants Bunge and Viterra explained that the best solution to address the ensuing damage, assuming the deal is finally consummated, is to break them apart again: now is the easiest time to do it.
New evidence on our hidden tax systems - SOMO
More on prices and markups: the top 1 percent of 51,000 listed firms enjoyed total markups last year of $6,952 billion – nearly $7 trillion. The bottom 50 percent of firms enjoyed total markups worth a twentieth of this. There’s plenty more to come from SOMO on this topic.
How to spot a monopoly - Hotels & Hospitality edition
A new report from Hotrec, based on a survey of over 3,000 hoteliers, clearly points to rising monopoy power. Booking (71%), Expedia (14.4%) and HRS (4.6%) enjoy a combined market share of 89 percent - and rising. Alongside this market power comes a rising ability to impose fees on hotels that increasingly have little choice but to use their services: now Booking charges some 20 percent, and rising. (And don’t get us started on “price parity” - where they can manipulate prices off their platforms.) This is pervasive: this week, a small-business Airbnb host, in the related (but different) holiday-home rental market, told us how they had to pay €120 in fees on a €600 booking: a far higher rate than just a few years ago.
The dangerous fusion of big tech and finance – what can be done? - Finanzwende
Digital payments in China ‘flipped’ in just a few years from financial firms to big tech firms, with Alipay and Tencent now making up 90 percent of mobile payments, and Alipay making up 60 percent of online payments. Could payments in other countries flip towards big tech monopoly? With Apple Pay and Google Pay, we are headed that way. Brett Scott, in his book Cloudmoney, explained the risks:
“This book is about a merger and an acquisition. The merger is between the forces of Big Finance and those of Big Tech. The acquisition is of power: once the merger is complete, Big Finance and Big Tech will have power over us on a scale never before seen in human history.”
A new report by Finanzwende in Germany explores, from an EU perspective. All is not lost, as the tables show: for example, they haven’t got into deposit-taking yet.
But extreme vigilance is needed, as big tech firms wield their unparallelled lobbying power to make further inroads. Among the solutions, breakups, and regulating the separate pieces effectively.
How to hide a monopoly, Amazon edition - The Atlantic
Amazon’s main public filings reveal little about its business models, for example:
You can’t unpick these numbers to separate out the results for different countries (for example, to find out what’s going on in the United States, or in tax havens.) There’s a long-standing campaign for “country-by-country reporting” to achieve that geographical breakdown: it’s had some success too. An article by Stacy Mitchell addresses a related matter: the hiding of business divisions inside the company making it hard to spot, for example, monopolistic predatory pricing to kill rivals.
Thanks for reading.