Giving Up on Europe

WaPo biz columnist Steven Pearlstein has given up on European economic reform. "Over recent months," he writes, "the political and economic rhetoric in [Western Europe] has betrayed a widespread belief in a wide range of economic fallacies: that there is a fixed supply of and demand for labor, that competition is a zero-sum game, that trade is a race to the bottom and that prosperity depends largely on the welfare of producers, not consumers. What's particularly missing from the European economic debate is any appreciation of the centrality of innovation as the source of prosperity and growth."

His major example of what's wrong with European thinking is the reaction to Google's plan to make available 15 million scanned books from various academic libraries. The president of the French National Library has perceived this project as a threat involving Anglo-Saxon cultural hegemony, and has persuaded the EU to develop a non-profit rival to Google.

Pearlstein shrugs off the "cultural paranoia" of this reaction, and focuses instead on its economic assumptions. "[T]he Google search engine has a bigger market share in many European countries than it does in the United States," he observes, "even after the creation of the world's largest free-trade zone and the launching of the euro, which were supposed to spur development of home-grown champions." Pearlstein wonders, "Why is the first reaction to a strong foreign competitor to launch a government-protected, taxpayer-subsidized rival?"

More to the point, "why would government officials assume that they have such exquisite instincts that they can identify a huge, untapped market for a European-oriented service that European companies have completely ignored?" Pearlstein thinks the answers to such questions also explain "why free market capitalism has yet to take root in Western Europe."

Pearlstein debated his column with Post readers online. Transcript here.