Europe needs an ‘Abundance Agenda’

Dalibor Rohac is a senior fellow at the American Enterprise Institute in Washington DC. Twitter: @DaliborRohac.
The near-universal derision with which European Commissioner Thierry Breton’s letter warning Elon Musk over “illegal content” on his X platform was met points to more than just Breton’s censoriousness or his delusions of grandeur. Truth is, far from being the regulatory superpower projecting the much acclaimed “Brussels effect” around the globe, the EU is slowly turning into a backwater.
This isn’t the first time the bloc’s regulatory zeal has prompted unexpected reactions from the industry either. For example, instead of duly complying with new and future AI regulations, Meta recently decided it simply wouldn’t roll out its Llama virtual assistant model in Europe at all.
Surprising? Not really. While the EU accounted for over 27 percent of the world’s GDP in 1990 — more than the U.S. at the time — today, its share is a little over 17 percent. And as Europe’s economic strength shrinks, the less it can project regulatory power on the world stage — a fact illustrated most acutely by the failure of 14 EU sanctions packages to derail Russian President Vladimir Putin’s war machine.
Centrists seeking to strengthen Europe’s global role and keep populists at bay would thus do well to make the economy a centerpiece of their policy agendas. And they could also stand to learn a lesson or two from the U.S., instead of sneering at America’s brutishness and political dysfunction.
Many of the grievances exploited by populists — from concerns about cost of living and rising fuel and energy prices to the pressure put on housing and public services from immigration — stem from a lack of economic dynamism and sluggish productivity growth.
And for all its problems, the U.S. economy remains significantly wealthier and more dynamic than its European counterpart. For instance, in a real income comparison using 2021 data, “French GDP per capita was lower than the 48th poorest U.S. state, Arkansas, while German GDP per capita had fallen to become as prosperous as the 38th [poorest] U.S. state, Oklahoma.” Moreover, real wages, expressed in terms of purchasing power parity, have grown faster in the U.S. than in any other G7 nation, and remain more than 30 percent higher than in Germany.
Gridlock and overwrought rhetoric coming from Washington is hardly an example to the world, of course. Yet, the combination of federalism and a large internal market continues to act as a reliable engine for American prosperity.
At the same time, America’s political antics shouldn’t distract outside observers from the fact that President Joe Biden has signed into law more bills passed with bipartisan support than any president in recent decades — including on semiconductors and infrastructure. Earlier in August, the White House announced new measures to streamline existing regulatory requirements involved in building new housing and transport projects. And while red tape and “not in my back yard”-ism remain a substantial barrier to economic growth — much like with other advanced democracies — behind the façade of climate change activism, the U.S. administration has also overseen a dramatic supply increase in oil production on federal land.
In other words, European centrists might just learn something from what seems to be a new emerging consensus among American centrists, sometimes called the “Abundance Agenda” or “Supply Side Progressivism.”
After all, many of the challenges of low productivity growth and regulatory obstacles to producing more energy, building more housing or kickstarting innovation are the same on both sides of the Atlantic. And just like governors in the U.S., national leaders across Europe have strong incentives to experiment with policies in order to attract entrepreneurs, investors and talent.
In the past, the EU sought to lead through programs, such as the Lisbon Agenda or Europe 2020, but these had mixed results. And what’s been notable since the pandemic and the embrace of decarbonization as the overarching policy goal by the previous the Commission is the absence of an explicit pro-growth agenda.
Authored by former Italian Prime Minister Mario Draghi, the upcoming report on Europe’s productivity is an opportunity to finally reverse this trend. Given the challenge posed by insurgent political forces across Europe, centrists and moderates of all political stripes should embrace a European version of the “Abundance Agenda.” What’s more, taking economic growth seriously isn’t just a matter of good policy and good politics, it’s also a precondition for the EU to be taken seriously as a geopolitical actor.