Europe and the East-Asian states
As usual, the European Union finds itself in several crises simultaneously - health, legitimacy, structural and economic -, as it sees to establish a new economic model to reestablish itself as a global economic force, it looks to the opposite side of the Eurasian continent. Paris, Berlin and Madrid look to Taipei, Tokyo and Seoul.
Asian Pacific democracies have become the new global benchmark in the post-pandemic world. Geographically small, very relevant economically and demographically dense. Offering an alternative model to the America-China bipolar world.
As Europe reopens its economy, the old continent introduces standardized practices in East Asia: state investment in technology companies, strong digitization of society, planned industrial policies. Europe bases the exit from the crisis on an East Asian model.
This economic pivot towards a liberal model, with a strong state role will have long-term consequences. It will offer systemic solutions to some of the problems of the 21st century such as the climate crisis. But it will have serious consequences, increasing public debt, new structural problems, and without proper planning it can increase social inequalities.
The reconstruction post-covid-19 crisis will strongly influence the structure of the European states decades to come. As Europe tries to create its own path between the rise of China and the current American political disaster, it finds in the democracies of the East a possible model to follow. Europe is pivoting to Asia.
Industrial policy and technological investments
European tech corporations are generally irrelevant in front of American and Asian groups. The first raised by the capital ventures of Silicon Valley and the later by public and private capital on the delta and the Chinese coast or the public-private support of Korea or Japan. The European Commission wants to actively support European groups and create an European alternative following East-Asia.
Some European capitals anticipate that a planned industrial policy will enable large European companies to compete globally. A model that may resemble Korean conglomerates or chaebols. Emmanuel Macron, one of the main promoters of active industrial policy, wants to grow up to 25 unicors in 5 years. London, typically with a lesser interventionist attitude, follows a similar strategy.
The European Commission empowered with a new agenda and probable new tool of debt financing, wants to base its economic reconstruction on a continent with strong industries and independent from external instability. Brussels ’prioritizes technology and energy industries.
Strategic technologies such as 5G, cybersecurity, artificial intelligence or super-computing will see increased European investment to develop continental technology structures. For years, super-computing has been receiving Europe’s capital for the development of its infrastructure, this new step will give more strength and capital to investments. The Commission should have to prioritize the software industry, which moves the giants of Silicon Valley and China.
Europe’s energy strategy is based on renewable energy enabling the green transition goals. Investments in renewable energy, electrification of the continent or a plan for hydrogen, following Japan’s footsteps to become the first hydrogen-based society.
Energy change will ultimately transform the mobility industry. Large public-private investments will produce large electric battery production centers. Transforming the German auto industry currently in danger in front of new electric vehicle groups like Tesla, Byton or NIO.
The current pandemic has made the Commission reevaluate and create a strategy for the independence in the pharmaceutical sector. China and India are the major suppliers of drugs in Europe from the most basic ones like paracetamol, to cancer treatments.
This industrial policy turn however is not easy or simple. Furthermore, a badly plan strategy could also have disastrous consequences to the state’s finances and economic structures. Finding the balance will be difficult, permitting the participation of the private sector within the strategy-making process.
At the same time economic and trade connections between European states and China or India are crucial both politically and economically. A regulatory framework hardly banning Chinese groups to buy technology could push Europe-China relations to the limit.
A complex Asian pivot
The economic model of East Asian countries is more complex than it may seem. Planned industrial strategy, boost in investment and subsidies in strategic sectors will translate into an increase in public debt. Some European countries already have a high public debt level. Europe will follow the footsteps of Japan, with a public debt of 235%, the highest on the planet.
This East Asian industrial policy is not only based on the good redistribution of productive resources, it is also based on the strengths of the educational model, a good regulatory framework and corporate and political leadership. Beyond the economic model, changes in Europe will also be crucial.
A Europe continent in transition approaching East-Asian democracies could open the door to new alliances between the two sides of the Eurasian continent. With the strong waters of authoritarianism in China, Russia, the United States and India. The European Union and East Asia can build strong relationships with shared interests.
Greater integration between the two sides of Eurasia could benefit the democratic model, opening the door to an alternative to today’s great powers. Europe is turning to Asia and the consequences will not be small.
