Creative Destruction on an Intercontinental Scale: Due to the Inability of Our Elite to Work, We, Western Europeans, Are Being Creatively Destroyed

Based on the work of Nobel laureate Joel Mokyr, conditions missing in the EU's internet and AI economy development include a fragmented digital single market, inadequate financial risk-taking, and insufficient institutional support for "creative destruction". While the EU is a leader in some areas of AI research and talent, these shortcomings hinder the translation of scientific knowledge into widespread economic prosperity.

Mokyr's three key requisites for sustained technological growth are:

 

    Useful knowledge: The expansion and sharing of scientific understanding and practical application methods.

    Mechanical competence: A critical mass of skilled technicians and entrepreneurs ("upper tail human capital") who can implement and improve new technologies.

    Institutions conducive to technological progress: Social and political systems that manage the disruptive effects of innovation and embrace change.

 

Missing conditions in the EU's digital and AI economy

Institutions that embrace "creative destruction"

The EU's regulatory landscape is often cited as too cautious, hampering the necessary process of "creative destruction" where new companies and technologies displace old ones.

    Vested interests: European regulatory and political systems may still allow established interest groups to impede disruptive change, a phenomenon Mokyr documented throughout history.

    Balancing risk and innovation: In 2024, EU enterprises' use of AI technologies was low, ranging from 3% to 28% across member states. While regulations like the AI Act aim to create safe conditions, critics argue they may discourage new market entrants by creating a heavier compliance burden than in the U.S. and China.

 

Fragmented market conditions

Unlike the unified market of the United States, Europe's digital economy is fragmented by national borders, which hinders scaling innovation across the continent.

    Uneven adoption: There is a significant disparity in AI adoption among EU member states. In 2024, Denmark had an enterprise AI adoption rate of nearly 28%, compared to just over 3% in Romania. This fragmentation slows the overall integration of new technology into the European economy.

    Competition issues: While competition policy is a focus for EU regulators, concerns remain that the dominance of U.S. and Chinese "big tech" in the digital market makes it harder for new European players to enter and compete effectively.

 

Availability of venture capital

While the EU has strong foundational research, it lags behind the US in the venture capital financing necessary to transform innovative ideas into large, successful businesses.

    Funding gap: This lack of sufficient investment means that many promising EU tech startups must look elsewhere for funding, often leading them to relocate to the US to scale up.

    Scaling businesses: Mokyr's work emphasizes that innovation must be put into economic use to drive growth. A venture capital gap creates a bottleneck, preventing the large-scale implementation of "useful knowledge" developed within Europe.

 

What the EU does well

It is important to note that the EU has strengths that align with some of Mokyr's conditions for growth:

 

    Strong foundational knowledge: The EU boasts a robust base of "useful knowledge," with excellent universities and a large pool of talented researchers.

    Skilled workforce: Mokyr highlights the importance of "upper tail human capital"—the skilled artisans and technicians who implement and improve new technologies. Europe has traditionally excelled in this area, producing many highly skilled workers.

 

Germany and France, the biggest EU economies have many gigantic companies that are afraid to suffer from creative destruction by innovations. So these countries mostly keep quiet about these problems. Young economy of Poland encourages Poland to talk clearly about this:

 

 

“This year’s Nobel Prize in Economics went to researchers who study innovation and “creative destruction,” issues in which the United States and East Asia are leading while Europe lags behind.

 

 

The Nobel Prize in Economics was awarded to Israeli-American Joel Mokyr, Frenchman Philippe Aghion, and Canadian Peter Howitt for their research on the impact of technology on sustainable economic growth.

 

Joel Mokyr of Northwestern University in the United States was recognized for “identifying the conditions necessary for sustainable economic growth through technological progress.”

 

Philippe Aghion, associated with the Collège de France in Paris and the London School of Economics, among others, and Peter Howitt of Brown University in the United States, were recognized for their “theory of sustainable economic growth through creative destruction.”

 

This "creative destruction" is a process in which new, more efficient economic structures emerge, and new players gain business leadership at the expense of companies that are less able to cope with technological progress. Over the past decade or so, we've seen this in the US, where digital giants have emerged, dictating the rules of the game on the global internet. This process was also exemplified by the rise of Tesla and Chinese car manufacturers, which was accompanied by the crisis affecting the German automotive industry.

 

The 2025 Nobel Prize in Economics was awarded. Honorable Mention for research on the impact of innovation on economic growth

 

"Creative destruction" on a gigantic scale may also be linked to the development of artificial intelligence technology. It just so happens that the Americans and Chinese are leaders in this research. And Europe? Well, it could be subjected to "creative destruction" at its own discretion, benefiting corporations from the US and China.

 

Innovation is not the European Union's strong suit. Yes, it boasts about the discovery of Ozempic, a rapid weight-loss drug developed by a Danish pharmaceutical company. However, this is not enough. One might get the impression that Western Europe has missed the opportunities presented by the digital revolution. It hasn't created any internet giants. It's not just Eurosceptics who are widely discussing the lagging behind in European innovation. Mario Draghi, former President of the European Central Bank, also did so in his competitiveness report. However, his report sparked very limited discussion in Europe.

 

EU elites prefer to remain complacent, believing that EU countries are "saving the rest of the world" by pursuing highly ambitious climate goals. They give little thought to how to ensure the energy needed to power databases and the entire infrastructure supporting artificial intelligence. For "environmental" reasons, shale gas extraction has been blocked in much of Europe, and in Germany, Angela Merkel initiated the process of decommissioning nuclear power plants over a decade ago. With expensive energy and an overregulated economy, the prospects for European innovation don't look good. Perhaps Europe will only face duplicating what others have already invented and rediscovering forgotten technologies."