Diesel über Digitalisierung – How Europe Got the 21C Wrong. From Russia With $$$. And ‘Knowles-y’ – the Aramaic Scholar Who Became A Global Voice #223

Grüezi! I’m Adrian, welcome to this week’s newsletter.

1?? Europe’s 21C Dilemmas Dissected

They put diesels over digitalisation.

Europe’s 21C – funded by Chinese consumers, fuelled by Russian gas, and defended by the US –?is coming to an end.

What’s gone wrong? You could ask professors, politicians, bankers and public servants, or you could ask Mario Draghi – he’s done all those jobs –?and check out his report on Europe’s competitiveness which looks set to shape conversation about the continent for a while to come.

Here’s Draghi’s diagnosis:

1. Energy: High prices and volatility hurt Europe’s industries.
2. Raw Materials: Over-reliant on imports.
3. Digitalisation: Investment needed in AI, semiconductors, and fibre.
4. Automotive: The EV challenge came. Germany’s auto industry choked – or in Draghi-speak, the EU applied “a climate policy without an industrial policy.”
5. Old Industries: Decarbonise while keeping steel and chemicals alive.
6. Clean Tech: Europe is a major market, but struggles with manufacturing.
7. Skills: “The EU has only three research institutions ranked among the top 50 globally … the US has 21 and China 15.”
8. Investment: Productive investment levels are too low. Europe must channel savings into growth.
9. Innovation: Behind the US and China.
10. Decision making: Too complicated by half.

“No EU company with a market capitalisation over €100 billion that has been set up from scratch in the last 50 years, while all six US companies with a valuation above €1 trillion have been created in this period… Young innovative tech companies may choose not to operate in the EU at all.”

Draghi is half technocrat, half aristocrat, a powerful symbol in himself of Europe’s problems and potential.

European elites – like Draghi – are sophisticated enough to diagnose the symptoms and prescribe a cure.

But they lack the legitimacy, authority or charisma to ensure the patient takes it.

Nearly three-quarters of the EU’s gap in GDP per capita with the US is down to lower EU productivity.

So what is the remedy? Read on.

?? The Economist has a short Draghi essay if you can’t read the whole thing...

2?? All Plans Require Money

Who pays for this one?

Mario Draghi wants the EU to borrow €800 billion a year (about 4.5% of EU GDP) to spend on re-fitting itself for the future.

To do this, the EU would have to behave like a federal government, and it isn’t one.

Without a central political authority to square the circle, Draghi is reduced to telling people that Europe faces an “existential crisis.” This kind of rhetoric doesn’t build political coalitions.

About two thirds of the EU’s people live in just five countries: Germany; France; Italy; Spain; and Poland. Where is the political platform that might unite them?

Draghi doesn’t have an answer to that. Nor does European Commission President Ursula von der Leyen (who asked him to produce the report).

And the response from Germany’s finance minister about Europeans borrowing together?

“I am very sceptical about Mr Draghi’s approach to debt. That can be summarised briefly: Germany should pay for others.”

?? Mario Draghi’s plan to fix a broken Europe already looks impossible.

3?? So How Could Super Mario’s Plan Be Paid For?

Sneaky ways to come up with the cash.

What if there was a way to achieve these goals without full-scale joint borrowing?

Here’s a breakdown of how 75% of Draghi’s plan could be funded using a variety of tools, ranked by potential contribution:

1. Project-specific Joint Debt: Bonds for time-limited, high-impact projects like green energy and digital infrastructure. This could limit political resistance by focusing debt issuance on specific, targeted initiatives. (30%)
2. European Investment Bank (EIB) Expansion: The EIB could issue EU-backed bonds to fund long-term infrastructure and energy projects. This provides significant capital without pooling national debt. (15%)
3. EU-Wide Investment Fund: States could contribute to an EU-wide fund dedicated to major projects, pooling resources whilst avoiding direct debt issuance. (15%)
4. Public-Private Partnerships: Private sector investment could help fund infrastructure and tech projects, reducing the burden on public budgets and sharing the financial risks. (10%)
5. Capital Markets and Banking Union: Greater integration of EU financial markets could attract more private capital for infrastructure and digital projects. (5%)

The rest? A mixture of the following:

• Carbon and Green Taxes: Could generate revenue specifically for climate-related projects. (10%)
• Green Bonds and Innovation Bonds: To attract investors focused on sustainability and innovation, offering a way to fund key projects without relying on traditional debt. (5%)
• Digital and Financial Transaction Taxes: To fund innovation and digital transformation. (5%)
• Voluntary National Contributions: Some States may be willing to contribute more to strategic areas like defence or innovation where they have a stake without forcing others into joint debt arrangements. (10%)

This approach – “diversified” in political language, “piecemeal” to you and me – pulling from a range of funding tools, could meet Draghi’s €800 billion target while avoiding the political friction associated with full-scale joint debt issuance.

It’s one way to muddle through if Europe wants to commit to his vision of future competitiveness without compromising national fiscal sovereignty.

But again. It isn’t something anyone will get to vote on…

?? Draghi’s Europe plan collides with national crises.

4?? George W Bush on Populism

Not as dumb as he seemed…

In case you wondered why populism is on the increase, George W Bush thinks he has the answer.

It’s the way politicians responded to the 2007-8 Global Financial Crisis by bailing out the banks:

• “I listened to (Hank) Paulson and (Ben) Bernanke and spent your money to bail out the guys who created the instruments in the first place, which is an absolute political disaster.

“You wonder why populism is on the rise. It starts with taking taxpayers’ money and giving it to the powerful. It really irritated a lot of Americans, and they haven’t gotten over it yet.

• “That’s just part of it; there’s a lot of other reasons why. But we’ve had candidates say, ‘You’re mad, I’m going to make you madder.’ As opposed to, ‘You’re mad, I have some solutions to make you less mad.’
• “We’re kind of in the madder stage, where people are exploiting the anger as opposed to dealing with it like leaders should.”

?? This is from David Rubenstein’s new book The Highest Calling.

5?? Britain From America

Reflections on a fall...

Two intelligent Americans – Anglophile in outlook – discuss Great Britain. Joe Weisenthal asks Adam Posen a question.

?? The whole podcast is here.

6?? Russian Disinformation vs US Democracy

‘Project Good Old USA’

Back in 2022 I wrote an oped for Canada’s Globe and Mail, warning about the dangers of Russian disinformation poisoning their democracy.

• “As citizens of open societies, we may well mistrust elites and institutions. We may well feel that our interests are not aligned with or well represented by our governments. Those feelings are both reasonable and legitimate.
• “Yet such sentiments, which are often steeped in feelings of uncertainty and the loss of a sense of control, are powerful drivers of conspiratorial beliefs and make societies ripe for disinformation.”

Some Conservative politicians, who’d found the Russian attack lines more grist to their mill, dismissed that warning.

Now there’s Project Good Old USA, a more sophisticated attempt to undermine the US 2024 elections.

From one of the documents:

In order for this work to be effective, you need to use a minimum of fake news and a maximum of realistic information ... you should continuously repeat that this is what is really happening, but the official media will never tell you about it or show it to you.

Key takeaways from the indictment?

1. Covert Funding: Russia allegedly funnelled $10 million to a company called Tenet Media to push pro-Kremlin messages through popular conservative influencers. Funds went through shell companies in multiple countries to obscure their origin.
2. Established Voices: Unlike troll farm and bot tactics, this leveraged existing social media stars with millions of followers, including Benny Johnson, Tim Pool, and Dave Rubin.
3. Wider Reach: Tenet’s YouTube channel alone got almost 16 million views, demonstrating the potential impact of these campaigns.
4. Culture War Content: Tenet’s videos concentrated on divisive issues like race and gender, amplifying Elon Musk, and undermining Ukraine.
5. Regulatory Fail: The case exposes big loopholes in regulating content on social media platforms.

?? Tenet Media’s website is still live…

7?? RIP David Knowles

I hate doing this… But here goes.

Why am I encouraging you to listen to this? It’s a little glimpse into the whimsical character of a very special young man who we lost to a heart attack at just 32.

David Knowles arrived at the World Economic Forum in 2017. He was quirky, funny, charismatic and extremely smart.

A musician, Aramaic scholar, Islay enthusiast, Scotch afficionado, cricketer, pub quiz ringer and more – but above all, he was his own man.

In Geneva he helped us build a story-telling platform, but we knew that he longed to measure his talents against one of the world’s great stories.

He left in 2020 for the Telegraph, and in February 2022 he found that story – Ukraine – creating and building their podcast for a global audience. The hallmarks of his reporting? Humility, empathy and authenticity.

David managed to combine all this with a brilliant talent for friendship that made his impact on the world less like a pebble rippling a pond and more like a comet strike.

You can see that in the overwhelming outpouring of grief and remembrance from friends, colleagues, acquaintances and listeners.

Although his life was short, he filled it to the brim. To his family and the many people who loved him, condolences.

?? A raw and very moving tribute from his Telegraph colleagues is here.

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Best

Adrian