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A public policy blog from AEI
If you listen to America’s pessimistic populists, America is so over. We are all in the position of Emperor Honorius watching the Visigoths come over the seventh hill as the sack of Rome begins. (Guess who the Visigoths are in this analogy. Some, I assume, were good people.)
Or to update things a bit, this is the “Flight 93” election, at least according to a recent viral essay. This argument, as I recently described it, posits America’s doom “unless those who value an isolationist, protectionist, and perhaps paler America ‘charge the cockpit’ in Washington and seize control from the open borders–loving, free trading, perpetually warfighting ‘Davoisie oligarchy.'”
That’s not how I see things. My views are more in sync with this notion put forward recently in by Jonathan Margolis in the Financial Times:
So for all its failings and warnings that the US is “over”, in reality, it is not just the new Roman empire, but a reincarnation of the Roman empire at the height of its power, perhaps around 117AD — 170 years before it began to fall apart.
What are the reasons for such optimism? A big one is America’s unparalleled ability to innovate at the technological frontier and create high-impact, fast-growing new companies. In a recent column, Margolis chats with a European tech executive about the region’s tech woes:
Europe has unicorns, such as Sweden’s Spotify, the UK’s Asos, and Germany’s Zalando and Rocket Internet. But they have not become, he says, indispensable internet platforms. They do what they do brilliantly, but none is a Google or an Amazon.
As Mr Robinson explained, in the US, the value of the three biggest listed internet companies, businesses whose creations have become platforms in their own right, is $1.3tn. In Asia, it’s $583bn, In Africa (yes, Africa) it’s $76bn. In Europe, however, our top internet companies, including Russia’s Yandex, are worth $20bn.
This means we lack the ability to compete properly in the consumer economy, he went on to say. It is like being in the industrial producer economy of the mid-20th century, he argued, without having any car companies. “We really need to fix this,” he said. “People get excited about unicorns. The problem with unicorns, however, is that the internet giants’ technology creates the unicorns. And then the giants buy them up. They eat them.”
He and a collaborator, David Galbraith, a partner in the New York investment group Anthemis, call these unicorn-munching giants “lions”, the internet businesses at the top of the food chain — the likes of Google, Facebook and Microsoft. Even the world’s unicorns, Mr Robinson added, are skewed towards the US. According to CB Insights data, there are 176 unicorns globally, of which 101 are in the US, 52 in Asia and 19 in Europe. “We need more unicorns,” he concluded, “but most of all, we need more European lions.” …
Mr Robinson was encapsulating and enumerating a situation we all know and live with daily, but often do not quite admit to — and that has long fascinated me. It is that the internet is an almost wholly US environment, and that most of the money in it flows back to the US. … such is the momentum behind the US ownership of technology that, like the Roman empire, it could be a couple of hundred years yet before it all goes wrong.
What’s Europe’s problem? Three possible reasons: a) easier to raise venture capital in the US; b) America is not only a big market but a homogenous one; c) the US got a huge headstart from the US military “investing heavily in IT early and starting up the ecosystem.”
For more on this topic:
Yet despite all of the above optimism, public policy should seek to further strengthen this American competitive advantage and make the economy even more dynamic. “Better than Europe” shouldn’t be the standard.
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