The Great Technology Game: Europe and the Global Race for Innovation and Power

00:00:01: Welcome to the podcast of The Austrian Institute for International

00:00:05: Affairs.

00:00:30: Maybe, hopefully also covered the China topic with our panelists here.

00:00:39: I think that many Europeans feel and fear that Europe is somehow on a losing end in this great technology game.

00:00:54: And because Europe has probably, this also seems to be common sense that we've relied too much on the United States as a security provider but also is a provider of technology and infrastructure if you like.

00:01:10: Turns out now with Donald Trump who has more hostile stance at least it's perceived such from European perspective towards Europe that this dependency has become more tangible and many Europeans have just woken up, feel how dependent we are.

00:01:35: Just simple examples of payment systems only possible or credit cards that depend on US.

00:01:46: not only technology, but also companies need to speak of software and things like that.

00:01:54: On the other hand I think Russia's aggression war on Ukraine has highlighted how dependent we are in terms of military technology security.

00:02:08: Europe is in a process of kind of redefining not only its role vis-a-vis the United States, but also on a global scale and The game.

00:02:18: The big game for technology certainly plays it huge role as we are on a Global Scale experiencing a huge economic transition into something new.

00:02:30: We don't know where were heading to.

00:02:33: well so The question of industrial production in Europe is, of course a discussion I just need to mention probably the German automotive industry that isn't in deep crisis and also certainly affecting Austria.

00:02:52: Again, dependent in many ways or some sectors depending on German automotive industry.

00:02:57: So we're going to discuss these kind of questions and many more with today's panelists after you hear their short inputs.

00:03:05: And I'm very happy to welcome Eric Jones Director Robert Schumann Center for Advanced Studies at the European University Institute in Florence.

00:03:17: Among many other things, he wrote also several books and one of them is American Power in an Age Of Austerity with Dana H. Allen And the Year The European Crisis Ended published in probably too early to tell.

00:03:43: And he's editor of, co-editor many books and special issues... ...and co-Editor of the Journal Government and Opposition.

00:03:55: Francesca Guadagnio is an economist at VEV cooperating institute here in Vienna, the Vienna Institute for International Economic Studies.

00:04:11: And your research focuses on industrial policy structural change innovation and new technologies.

00:04:17: before joining VEV she worked on EU global issues as a senior researcher at CSIL Milan WIPO and UNCTAD.

00:04:33: What is that?

00:04:34: Octad, among others.

00:04:40: So welcome again.

00:04:41: Thank you for being here.

00:04:44: And Eric, maybe start with your short input and then move on to Francesca have a short discussion here on the panel and open up the panel for Q&A.

00:04:55: I really need to finish

00:04:58: sharp

00:04:59: at half past six because Eric has to catch flight and taxi will be waiting in front of our door.

00:05:08: so i'll restrict time Eric.

00:05:13: First, thank you all so much for giving me the opportunity to come and speak with you.

00:05:19: You can tell from my Texas accent that I'm unbelievably happy

00:05:25: right now

00:05:27: And if i

00:05:28: run too long

00:05:30: then just let me keep going because I don't know how long this happiness is gonna last.

00:05:38: But it is an extraordinary opportunity to talk with you, both because I feel hopeful for the first time in years and because last night a good friend of mine Stephen Feldstein came and presented his new book which is called Bites & Bullets.

00:05:55: It's all about how The Tech Revolution Is Changing Modern Warfare And inside this book he gave me completely

00:06:03: different

00:06:03: way to frame the conversation that we're going to have this evening.

00:06:07: So if it looks like I'm unprepared, It was then I was unprepared for Steven To change The way i think about technological innovation last night right?

00:06:17: And Im gonna share what I mean.

00:06:20: You see We Think About Europe in Technological Innovation and were obsessed with the idea That United States has Frontier models that are large language models and other forms of artificial intelligence.

00:06:33: And Europe does not have these things, and that's bad right?

00:06:38: But then you have to ask yourself okay well wait a minute.

00:06:41: is the limit innovation only about being at the frontier doing something new?

00:06:47: it has never been done before.

00:06:51: go Asia for example.

00:06:54: try pay with your phone And what you will discover is that they don't actually do small value transactions the way we do.

00:07:05: We rely on a point of sale, That's an electronic device that communicates with the transceiver and phone right?

00:07:12: Our innovation is this point of sale technology that then communicates through credit card networks.

00:07:19: That are owned by companies based in the United States.

00:07:22: so, when you pay your giving a small fraction every transaction to the united states go to Southeast Asia or South Asia or China and won't find anywhere.

00:07:34: as matter fact they do something very different.

00:07:37: They use camera on their phone to look at a QR code,

00:07:43: they

00:07:43: push a button on the QR code.

00:07:46: It tells them what their supposed input and make.

00:07:50: the transaction is much lower cost it's more widely used And its much more effective than anything.

00:08:00: I talked with a guy from Google who was responsible for developing the QR Code technology in India that became standard across Southeast Asia.

00:08:10: Why

00:08:11: is it that we don't

00:08:12: have

00:08:13: this QR code technology in the United States?

00:08:16: But they haven't at Southeast Asia.

00:08:17: And he said, well... In The United States people don't notice if their phone costs a hundred to one-hundred and fifty dollars more because It has a transceiver on top To communicate with a point of sale.

00:08:31: but in India They do notice!

00:08:34: They can't afford a hundred and fifty dollar's more than a phone.

00:08:38: They will pay for camera but not for a transceiver.

00:08:43: And so the innovation was to say, okay if they're gonna use a camera how can we transform a camera into point of sale?

00:08:54: They used existing technologies in different way and adapted them.

00:08:59: in process created more secure form financial transaction much cheaper a financial transaction.

00:09:08: So we are not only overpaying for the hardware, We're over paying for the transaction and the transactions controlled by companies in The United States that we don't want to be dealing with In the first place.

00:09:20: This is the story of innovation I wanna tell you about.

00:09:23: It's A Story That Says Yes There Is A Frontier Where We've Never Done this Thing Before But there'S Also The Capacity To Scale to take something new and make it available.

00:09:38: And then there's the capacity to help people adapt so that they actually begin to use in their daily lives.

00:09:47: Innovation affects

00:09:49: all

00:09:49: three of these dimensions, not just for competitiveness or cost effectiveness But also, and this is the point that makes Steven's book so relevant for security.

00:10:09: Let me explain.

00:10:10: And Changus please do tell if I go on too long but i'm very excited about this new idea right?

00:10:17: So let me explain.

00:10:20: If you read The Draghi Report...The Draghi report is all about redefining competitiveness as increasing total factor productivity growth.

00:10:31: Nobody in this room except for Francesca knows what total factor productivity growth is, right?

00:10:37: But Total Factor Productivity Growth means if I have a fixed amount of labor and a fix amount capital And i want to produce more with that fixed amount Of Labor In That Fixed Amount Of Capital Tomorrow Than I Do Today.

00:10:52: That Is Total Fector Productivity Grows Because I've Got The Same Factors Right but Im Going To Produce More Out Of It.

00:10:59: And we talk about innovation as a way of changing the way that use fixed amount stuff to get more stuff

00:11:07: out.

00:11:08: Stuff is Texas jargon for stuff, right?

00:11:13: In this kind of total factor productivity growth you would be fair ask in The Drug You Report.

00:11:18: where does it come from?

00:11:19: Part comes from frontier innovations.

00:11:22: We're going create new technologies But part just comes form making available things that would help you do your work better and then teaching you how to do it.

00:11:34: Think of in the context of large language models if you listen to Ursula von der Leyen, her State-of-the-Union address what she said is we don't need to be competing with United States or China for frontier models.

00:11:46: What We Need To Do Is Make Sure That The Artificial Intelligence We Use At The Firm Level Helps Us Work More Efficiently And then, we need to make it easier for firms to adopt that technology so those firms use the same amount

00:12:02: of stuff

00:12:03: and get more out.

00:12:06: This kind of total factor productivity growth is key in our competitiveness because if you can get more things from what you have than this means your product will be lower at cost.

00:12:20: That's going

00:12:21: help us

00:12:23: pay higher wages so that we can have a richer and richer society, which is the goal of whole exercise.

00:12:31: The other problem though if were going to compete who are we competing with?

00:12:37: Maybe we're competing with China.

00:12:39: If we are competing with china, China has strategy for taking frontier innovations from other countries bringing them back to China And scaling up to such an extent That when they sell this same technology We can't compete with Chinese industry.

00:13:01: The United States invented the solar panel.

00:13:04: Germany taught us how to make solar panels at scale and quality.

00:13:10: China took that scaling and Scaled it up so much further than It could be adopted by anyone because of price had come down far enough That was possible for use.

00:13:22: And along the way, China effectively dominated the solar panel industry.

00:13:30: And now we don't produce solar panels in the United States, you don't even produce them in Germany and this is a problem.

00:13:37: We have to figure out how they did that.

00:13:38: That's the industrial policy aspect of this.

00:13:42: But but the concern Is in Europe In The United States?

00:13:45: This Where All Tied Together This Thing Something That China Did Not

00:13:51: Work

00:13:52: According To The Rules Of Market Competition At The Global Level and that it has affected a transfer of wealth from the United States, Europe in Europe to China.

00:14:03: That we did not want to see transferred.

00:14:06: And that the same thing is happening with battery technology In.

00:14:10: The Same Thing Is Happening With Electronic Vehicles?

00:14:13: And the Same Thing is Happening with Every Other High Value Industry.

00:14:18: Even Worse As This Is Happenning The United States Is Beginning To Take Technology Away From Access To Europe And to tell Europeans what they can and cannot do with the frontier technologies that the United States has developed.

00:14:33: The Europeans are looking at saying, well wait a minute we're losing value for the Chinese We're loosing control of the US.

00:14:41: So future is for Europe To re-create the whole stack To start its own innovations To scale them up Because it's the only way to retrieve power and prosperity in this global competition.

00:15:00: And that's why this panel is so important, because if thats what Europe needs to do the challenges are immense.

00:15:07: In terms of financing innovation must take place across a whole range of technologies.

00:15:16: What Draghi says Is that cost for this is greater than we can possibly imagine almost eight hundred billion per year.

00:15:25: So we need to figure out how To get that money back into Europe.

00:15:31: and if we get another round of questions I'll tell you the secret.

00:15:41: Yeah,

00:15:58: so I have the temptation to react too.

00:16:00: all that I heard but i will stick To what?

00:16:03: I decided.

00:16:03: That was how we'll be talking about before a react But just maybe link two things that I've heard people.

00:16:13: The first link is how come.

00:16:15: in a way you are saying like how come then would just work out in Europe, right?

00:16:19: After so many years of trusting that we could get US technology.

00:16:23: But I think there are also a few other things that help us waking up really quickly like it was like cold shower and i think one at least two things but maybe three.

00:16:38: So what is when the technological revolution happens either you're part or not and when you're not part of it, well then your benefits are very much smaller.

00:16:51: And that's what people wake up with in this technological revolution because its really something that affects all the industries.

00:16:58: I think was felt there wasn't just another technology.

00:17:02: they were missing out.

00:17:03: This is a new technological wave.

00:17:05: if we miss their chance The prospects for future growth will be much less positive.

00:17:15: The other thing that I think played a role is, we also thought... ...that we didn't have to manufacture anymore.

00:17:22: that why would we manufacture, be in the factory where we can outsource everything to Asian countries and import technology there.

00:17:32: We import products here And thats it!

00:17:35: That's perfect.

00:17:37: But then industrialization started showing its weaknesses Not just in terms of economics but also politics.

00:17:45: So I think this was really a wake up call.

00:17:48: The other thing we depended on from states the idea that we didn't need industrial policy.

00:17:53: They sold it to us very well, that Washington Consensus – We don't need an industrial policy!

00:17:58: We do a horizontal industrial policy…we don't select...We don't finance.

00:18:02: The state becomes as small as he can.

00:18:04: While in the meantime the US was doing industrial policies China also did industrial policies.

00:18:09: All of them were done in Japan and Korea You name it.

00:18:12: And we weren't doing industrial policy.

00:18:14: Well twenty years like this with an horizontal industrial policy under finance, untargeted.

00:18:20: It creates troubles and then you miss the train on solar panels that once you had it now all together you don't have it.

00:18:28: so I think there was also this issue of a very timid industrial policy.

00:18:34: um That was absolutely underfinance.

00:18:38: Now we are talking about the competitiveness fund but for years There were no dedicated funds for industrial policies.

00:18:44: innovation policies maybe finance slightly more but equally.

00:18:49: untargeted, like unstrategic use of public funds if we want.

00:18:55: And at the same time as I said US and China that were working very well in.

00:18:59: what we're doing was regulations regulation regulations.

00:19:02: i'm not against regulations.

00:19:03: I think regulations are great.

00:19:05: We need a state to regulate.

00:19:06: That's one of the functions of the State and regulations can open up also opportunity for innovations.

00:19:11: adaptations have plenty of examples If somebody is interested but Regulation cannot be the only bullet you have.

00:19:20: You've got to put regulation and money, otherwise they're not going very far.

00:19:26: And then there is all this debate on strategic dependencies that we can also delve deeper into later.

00:19:34: So basically what I would say happened was years, decades and decades at least two decades of literally no industrial policy.

00:19:44: And now a slow shift towards a more targeted approach.

00:19:50: Towards specific technologies, specific industries.

00:19:54: and I've put up together few slides just to give you some concrete examples.

00:20:00: this is coming from one of our latest studies on Made in Europe and the Industrial Accelerator Act study commissioned by the European Parliament.

00:20:10: and basically what we are showing in this table is that why were doing virtually nothing.

00:20:16: Countries like the US, countries like China had policies like what we're discussing today made Europe.

00:20:24: they have it since early nineteen ninety.

00:20:27: three, thirty-three with local content requirements and obligation, very sharp policy.

00:20:35: And now we are starting to discuss

00:20:37: this.

00:20:39: The other element of how industrial policies... So on the one hand a positive sign We're moving into more targeted industrial policy Very welcome.

00:20:50: On the other hand, we are making it a bit complicated.

00:20:54: So if some of you have given look at the Industrial Accelerator Act You will see that its very long document and you'll see things like this.

00:21:04: so for single industry like Automotive Supply Chain you had all these specified components which would be covered by policy of the component.

00:21:16: You open a component and you look at the components of that component, And the policy establishes in three years this component has to be made into Europe.

00:21:24: In six years these components plus those components have been made into europe.

00:21:28: At the same time The US as something like... Do want to have public procurement?

00:21:34: Do you want to bid in the

00:21:36: U.S.?

00:21:37: probably a procurement contract, fantastic.

00:21:39: Hundred percent!

00:21:40: Seventy-three per cent of your... one number, seventy three per cent.

00:21:43: You show me you have seventy three percent of your product made in the

00:21:46: U.S.,

00:21:46: and get that contract.

00:21:47: otherwise don't.

00:21:49: That's the policy.

00:21:50: No endless discussions or numbers.

00:21:52: And we do it Chinese.

00:21:56: Same thing Procurement eligibility, Chinese government agencies must purchase domestic goods, works and services including when the required items cannot be obtained within China in China.

00:22:12: Simple you do it tomorrow.

00:22:15: now I'm not a fan of single numbers.

00:22:17: so if you read the report to see that um i've tried to push for no single number whatever wherever necessary.

00:22:26: but I think this is something balance that the policy needs to strike.

00:22:31: We want to be precise, we want to stimulate innovation in the right direction but also need a policy tomorrow not another six months or year and make the policy making process in Europe a bit leaner because more time passes the more we lose photovoltaics possibly other industries.

00:22:55: Now, when you think of industrial policy in this way... ...this is opening a lot of tensions.

00:23:04: On the one hand we want to make it in Europe but if we do that then it's going to be more expensive than buying the solar panel from China.

00:23:14: This will have impacts on the fiscal side and also on how... the adoption of green technology, on the speed of adoption in green technologies because if prices go up well we will buy less.

00:23:30: I don't want to simplify this picture but it's a very complex line that is working and whenever you talk about industrial policy there are lots issues that come up.

00:23:40: How do we resolve the fact that different member states have different capacities in green technologies, for example or another technology?

00:23:48: So a policy that is targeting certain technologies could benefit some countries more than others.

00:23:55: so it's not an easy job but we have to do it and In the interest of time I can also close here.

00:24:05: Let's

00:24:05: close

00:24:07: it here.

00:24:08: Then I'll start with my questions before

00:24:11: i open up the floor.

00:24:13: Francesca, what

00:24:14: did i get from... My mini conclusion

00:24:17: was should Europe have been more protectionist than...?

00:24:22: It's been, is it still hanging on a liberal world order and you know that the trade will

00:24:31: through

00:24:32: open-trade positive things come out?

00:24:36: Should we have being more cautious in that regard or should be

00:24:39: from now off.

00:24:40: Okay so I mean The economy's answer is no And thats why i mean We call it Open Strategic Autonomy.

00:24:52: and that's why also in the report we say, for example now with the Industrial Accelerator Act one of the main discussions so this made-in Europe is whether Made In Europe should be literally made in Europe.

00:25:03: So within the U-Twenty Seven or Made In European is more something like made WITH Europe including opting countries, countries which for example Europe has a free trade agreement, countries there are signatories agreement with the WTO so that there are discussions.

00:25:23: exactly for this reason.

00:25:24: we don't want to destroy international right alliances, international relations and supply chains that have been built over decades and decades, these companies had their supplier in China not since tomorrow.

00:25:38: And if tomorrow you say look I cannot import it from China anymore You are creating a major disruption to the production of operations.

00:25:46: they have their suppliers.

00:25:48: The system works

00:25:49: good

00:25:49: like this.

00:25:51: That's the economic sense with which i completely agree on what we do here.

00:25:59: We have a situation where we have European peripheries with serious problems in terms of jobs.

00:26:08: Although there are skilled problems, we still have populations that don't feel included... ...that is green discontent and people voting out of this content And I wonder if they shouldn't be a middle ground.

00:26:27: We're not going to go through protectionism, in per substitution style like the nineteen seventies.

00:26:33: of course we are not promoting that but as strategic approach.

00:26:37: so let's see what we can feasibly do?

00:26:43: Let's see well we can realistically do what is strategic to do.

00:26:46: So for example one line of work I'm trying take a technology, let's open up the technology and see what doesn't make sense to produce in Europe.

00:26:58: And there we will use our openness—we'll use technologies that already exist —the production of China or Asia whatever—and what can be done?

00:27:06: We need something that is technically feasible with a forward-looking perspective.

00:27:15: so I think as economists you also have to understand a little bit more about to be able to understand within this technology, what is the component?

00:27:24: What's part of the value chain that has some potential we can still extract as Europe.

00:27:30: We're not going to compete on standard small components.

00:27:35: nobody cares but we have to find a part of our product where we can play a role and not renounce

00:27:42: it.

00:27:44: Thank you Eric.

00:27:46: one my takeaways from your presentation was that adaptability is also part of innovation, I think.

00:27:53: That's

00:27:54: for me an

00:27:55: interesting insight and important one.

00:27:58: so but my question would be do you think in Europe there is enough

00:28:03: of a culture

00:28:04: of adaptability?

00:28:05: I think thats probably the advantages of United States.

00:28:10: I mean Europe its not only an old continent it´s also a graphically aging continent.

00:28:16: probably more resistance, or is that just a prejudice an idea

00:28:21: I have about Europe?

00:28:23: So one of the things to bear in mind is that necessity is the mother of invention.

00:28:33: And Europeans respond well to necessity.

00:28:38: For example, In the early nineteen hundreds much use in Germany had to be purchased from merchants who would harvest bat guano and chile, right?

00:28:56: The nitrates that were left over by generations of bats basically pooping on islands in Chile.

00:29:04: And they realized this was an incredible source food insecurity for Germany.

00:29:13: so a process for fixing nitrogen from the air called The Haber-Bosch Process.

00:29:22: And in, and the Haber Bosch process revolutionized it way we produce fertilizers.

00:29:28: Now this is an important story because very soon after they created these processes.

00:29:33: in nineteen oh nine that British put blockade on Germany.

00:29:37: in nineteen fourteen In the German people began starving Scale up the Haber-Bosch process, which was initially hideously expensive because it requires an enormous amount of energy.

00:29:52: But once they scaled it out.

00:29:54: They revolutionized agriculture for the world at large.

00:29:57: so when we think that That you know Europeans can't innovate?

00:30:03: They can at the frontier on The scaling and in the adaptation.

00:30:08: the problem is is that the Habervasch Process Created a different form of vulnerability.

00:30:14: We need to produce fertilizer in places that have massive amounts of hydrocarbons, because we use the hydrocarbons as the feedstock.

00:30:23: That were gonna combine with nitrogen to create nitrates.

00:30:27: and we used a hydrocarbon says energy force these things to come by.

00:30:31: That's why weren't such a mess?

00:30:33: would this trade for moves today?

00:30:35: Because we produced a mass amount on the world's fertilizer in the Middle East, particularly around the Persian Gulf.

00:30:42: Why?

00:30:42: Because there's lots of hydrocarbons for feedstock and for the energy required to bring them together.

00:30:51: And so the European question is how are we going to deal with that problem?

00:30:56: I would not put it past European scientists To come up with a better way to fix nitrates.

00:31:03: I wouldn't put it pass them because i know they're working on.

00:31:05: It was at The University Of Freiburg And by the way, the University of Freiburg has also got a material science division that's looking at all different kinds of battery chemistry.

00:31:17: Why?

00:31:17: Because lithium is not easy for Europeans to source.

00:31:23: Europeans are capable of tremendous innovation.

00:31:26: The thing is it wasn't necessary in the old model.

00:31:30: In the new model you can buy stuff from anywhere!

00:31:37: This is the only thing I'm working with Sabina Veand right now.

00:31:41: And Sabina, who created this open moniker for Open Strategic Autonomy when she was Director General of DG Trade at European Commission and yes it's open you have to have partners but no its not open.

00:31:56: my access to Lithium isn't your access to lithium if i prevent from getting my Lithium effectively, so we can only be open to partners with whom.

00:32:08: We have a trusted relationship and the trick is The United States does not want us To be able to access those partners.

00:32:16: This is why Mark Carney walked away from the trade negotiations With the united states because the United States was saying as part of their negotiations that Canada would not Be able to form similar partnerships with other parts of the

00:32:29: world right?

00:32:31: And Mark Carney said, no.

00:32:33: We're not going to do that.

00:32:34: and now mark Carney is taking Canada and come talking to the European Union because they had to choose between United States.

00:32:43: in the European union of course The choice is limited Because candidate can't escape geography But but but the choices nevertheless presenting itself because Canada can't trust the united states and it Can't accept American control.

00:32:59: I was in Singapore having the same conversation with colleagues at all levels of government about their relationship, but China.

00:33:06: China never tells anyone in Singapore what they cannot do.

00:33:11: it does not need to.

00:33:13: There doesn't need to be a written rule.

00:33:16: They just send this signal and if you don't comply suddenly You lose access To whole parts of the supply chain on which who are independent.

00:33:26: And this is the challenge.

00:33:28: exactly as you were saying Francesca We have to be able to control enough of the supply chain either directly or through tested partners To produce the stuff that we need.

00:33:39: and in This is not open strategic autonomy.

00:33:43: This is relational strategic autonomy.

00:33:48: In this relational context Europe

00:33:51: has to form

00:33:52: alliances.

00:33:53: And that's not something we were ever trained to think about when I was learning international trade theory in the late nineteen eighties and early nineteen nineties, Francesca is absolutely right.

00:34:06: they framed all of this out-of-international economics.

00:34:11: We never talked about industrial policy or linked industrial policy to public procurement, because everything was supposed be the free

00:34:19: market.

00:34:19: It was supposed to be freely competitive.

00:34:22: and when The United States continued to apply local content requirements they said well yeah but that's Local states in governments And you know They're really pesky and like all this democracy stuff.

00:34:34: so we are going Let them do that.

00:34:36: and European Union said Well We aren't gonna Do That!

00:34:38: We Are Going To Make All Of Our Public Procurement Completely

00:34:41: Open Everyone.

00:34:42: Well, it turns out that the United States was practicing industrial policy without ever saying the words.

00:34:49: And in Chinese we're doing the same and this is why Francesca's point so important.

00:34:55: Europe must look at the market not as an open freely competitive institution.

00:35:03: It Is Not Unless.

00:35:07: you work with partners who agree to abide by the same rules of game And those rules of the game have a lot to do with two very important things.

00:35:17: One is research security or an intellectual property rights, and other is financing.

00:35:25: so I'm gonna tease you again if i get a chance to speak...I'll tell you where the financing's coming from.

00:35:34: The adaptability Eric mentioned,

00:35:44: I'm wondering

00:35:44: whether the European institutions are adaptive enough.

00:35:49: If i look at the european union and its institutions

00:35:54: in the

00:35:55: political sphere what they

00:35:56: produce

00:35:57: with regard to neighborhood and foreign policy conceptions it's quite often same-same you know?

00:36:04: It is very much building on a bureaucratic experience within the EU, very institutional and hardly reflecting the reality sometimes that are taking place outside.

00:36:18: I don't wanna talk or bash too much to you.

00:36:22: I think they're trying hard but my question would be because you also highlighted these very technical approaches the EU has do see the adaptability of the EU institutions for this big tech game or competition we find ourselves

00:36:38: in?

00:36:40: Well, so I think it's already by design complex because you have many countries with different realities With different traditions also regarding for example industrial policies.

00:36:57: but different Also interests us And and also if we want a different tradition not just when he comes to industrial policy But also when it comes to macroeconomic stability.

00:37:11: For example.

00:37:13: And therefore, it's very difficult to put in the same room so many brains that think so differently and reach a conclusion.

00:37:22: They have

00:37:24: also different interests from... Absolutely!

00:37:25: Different interest, different conditions, preconditions.

00:37:28: So implicitly everybody knows for example if you put something like Made In Europe what is going to happen?

00:37:36: If this really was made in Europe This means that most of the things will be produced in certain countries, but countries like Greece, countries prefer countries where production capacities are difficult to establish.

00:37:52: They're not there today and they'll only pay because of their public procurement being only to European.

00:38:08: This is difficult.

00:38:09: At the same time, there's I think a misconception about regulations because adaptability it also like.

00:38:17: how come that regulation for example banning The use of certain chemicals or certain fertilizers?

00:38:23: the regulation can go on In certain cases more easily Of course.

00:38:28: in other cases we are shown We're seeing this not very easy but in some cases goes on quite Easily when there is no money involved And although those regulations also have an enormous impact on the industry.

00:38:45: So I think when it comes, probably this leads me to thinking now that I talk at...I'm getting clarity of the answer.

00:38:51: It depends a lot on money.

00:38:53: so we put them together as European Union and then distribute differently.

00:38:59: This creates winners and losers.

00:39:02: implicitly We are still not ready for that.

00:39:06: We think this is a European thing.

00:39:09: I'm sure in the States they also have similar issues and they have competitions among states, so either California takes it or

00:39:19: Texas takes

00:39:20: it.

00:39:20: So they must have the same problems but somehow they managed to solve them better probably And i think that's part of their adaptability problem

00:39:35: the United States.

00:39:38: And I have an add-on question, and then i'd

00:39:40: like to open the floor

00:39:43: because you talk first... The First Question is Have they solved it better?

00:39:46: What are the West's problems in that regard?

00:39:50: My second question would be You talked about production and the adaptability of European productive industry but we will see if its a bubble or not.

00:40:01: But AI such as big topic and its frontier technology If that is dominating, how can you kind of still be competitive

00:40:12: even

00:40:13: if so?

00:40:13: You can't take part in the frontier technology and have difficulties in adapting to production.

00:40:19: So where are we then as an

00:40:23: economy?".

00:40:26: I'm going tell because they're not asking me but money's gonna come from it.

00:40:33: The biggest point was what did United States do?

00:40:35: right A lot of people like to look at the United States and say, oh it must be something to do with the way they do taxes in transfers.

00:40:45: that's a very classical economic argument for why The United States has this single currency With different regions And yet seems make all work.

00:40:57: Right?

00:40:58: Unfortunately That argument is totally wrong Because thats not how the federal tax and transfer system Works and not only is it totally wrong.

00:41:08: It's completely at odds with the politics of this situation if The federal transfer tax and transfer system is doing such a good job holding in US economy together.

00:41:17: Why does everyone in the United States hate it so much right?

00:41:21: And nobody in the united states wants to pay taxes, and nobody actually likes To receive transfers.

00:41:28: its crazy how the system works Right.

00:41:32: So what are they doing right?

00:41:33: What the United States does really well is it floats a lot of debt, denominated in dollars.

00:41:41: And its very liquid market and then The United States draws in capital from the rest of world.

00:41:49: People invests In the

00:41:50: U.S.,

00:41:51: in stock market, in bond market.

00:41:53: The country just flush with your money.

00:41:57: Because even if you don't know I guarantee If have anything like a private insurance or private pension, you are heavily invested in the United States.

00:42:09: And those investments are making you a lot of money by making Americans even more money right?

00:42:17: and this is the secret sauce In The American Mix.

00:42:22: We borrow from everyone.

00:42:25: we invest an innovation...we pay them back some of the gain and keep their rest.

00:42:32: The problem is it hasn't been working well to hold down income inequality in the United States.

00:42:38: Did anyone here recently that we have our first trillionaire, right?

00:42:43: In Elon Musk whose companies make most of their money off public contracts To build private infrastructures.

00:42:53: Right.

00:42:55: It's just crazy!

00:42:59: These AI companies are about to IPO, which means initial public offering.

00:43:04: They're valued

00:43:05: at

00:43:05: hundreds of billions of dollars and your pensions in investment companies or insurance companies will buy that right?

00:43:15: And give that money to those AI firms in the United States.

00:43:19: so we want your money to come back to Europe.

00:43:25: That is what the Savings and Investment Union project, it's all about.

00:43:31: It's about making it possible for you to trust investing in Italy as much as you trust investing In The United States.

00:43:40: For some reason You're All happy To invest in the united states but many of you unless its property are unhappy to invest in Italy.

00:43:54: And yet, we have to fix that.

00:43:56: Because if you're not investing in Italy and Greece and Portugal and Spain and Ireland why anyone would invest in Ireland is a mystery me right?

00:44:06: But unless we get you to invest all these places You will get higher rates of return on your savings and it'll be here and industrialize the European economy.

00:44:16: That's the goal.

00:44:17: We need to get out of United States first though Right?

00:44:20: So this gets back to, check is your second point.

00:44:24: Frontier models in AI.

00:44:26: I've got a secret...I gotta tell you the Chinese are not at all concerned about making money off of frontier models and AI.

00:44:35: Why?

00:44:35: because they're basically stealing a lot of technology from United States using US frontier models to help build Chinese Frontier Models, and then they're repackaging them.

00:44:46: And selling them open source Open weight.

00:44:50: in other words.

00:44:51: They're giving him away for free.

00:44:53: You can download one and put it on your computer.

00:44:56: if I had brought my computer In i would show you?

00:44:58: I have a model an AI large language Model On My Computer.

00:45:02: It's not A Frontier Model Because My Computer Is Not That Big But but it Works.

00:45:08: And I do the compute locally, so i'm not paying anyone for my large language model to answer my email.

00:45:15: Right?

00:45:16: Think about that for a second breaks The business model of the large AI companies completely.

00:45:23: these open source Open Wake models

00:45:26: are

00:45:26: specifically for industrial application.

00:45:30: You

00:45:30: buy the chips and build the compute in your factory.

00:45:34: you don't have to pay any one.

00:45:36: That's what the Chinese are doing to undermine the US frontier model industry.

00:45:42: Why?

00:45:43: Because China has a great system for sharing data across firms, because the industrial application is where they see the secret sauce line and...because They're going to use that industrial application to make sure that they are more competitive industrially than anyone in the

00:46:01: U.S.,

00:46:02: right?

00:46:03: They win because they blow up the AI bubble, but also when?

00:46:06: Because all of them blow-up manufacturing industry and get to take it back to China.

00:46:11: I'm not saying this is a smart plan which why Ursula von der Leyen was right that we don't need to worry about frontier models or industrial applications.

00:46:25: We have to find benefits here where we know China will reap And it changes the way you think about innovation policy, right?

00:46:35: We've been using these words industrial policy and innovation policy.

00:46:38: What we're really saying is this state has a role

00:46:42: to play.

00:46:42: that's why It's called policy.

00:46:45: all The other stuff Is just white noise.

00:46:48: This State Has A Role To Play In The Market in Making Sure That Your Jobs Are Secure your Incomes are Adequate Your Industries Are Profitable And if we can get people to accept that the state has that role-to-play, even it's a limited role.

00:47:08: Right?

00:47:09: Then... We could begin rethink the whole European project To make work better for everybody and not rely on these crazy tricks in market By the way That have lot do with payments.

00:47:25: Here is where all close.

00:47:27: There's a wonderful book by guy called Sean Venata and the book is called Plastic Capitalism.

00:47:34: It's all about the technological innovation.

00:47:37: that Is The Credit Card You All Have In Your Pockets Right Now, That Technological Innovation Was All About Circumventing US Banking Regulations So They Could Connect Banks From One State To Another in United States And that has created the most profitable financial industry in history.

00:48:03: It's almost completely unnecessary, which is why I introduced that story about QR codes at the start.

00:48:10: There are ways we could do this without going through credit cards.

00:48:16: We're not doing it because of inertia So we need to change and a low hanging fruit can grasp easily.

00:48:27: Thank you for listening.

00:48:29: For additional content, consult our website oiip.ac.at.

00:48:35: Stay tuned for more intriguing insights!