A series of crises have shaken up long-held beliefs held by European elites. The Covid-19 pandemic and the war in Ukraine have dramatically highlighted the vulnerability of global supply chains and the limits of unbridled free trade. At the same time, the unfolding ecological catastrophe demands urgent action from governments.

After decades of neoliberal dogma, in Europe, these developments have put industrial policy front and center again. The International Monetary Fund (IMF) has termed it as “the return of the policy that shall not be named.” The green and digital transitions are seen as key pillars of this policy.

While the weakening of neoliberal beliefs is a positive development, these policies still fail to establish the necessary conditions for substantial change. This is particularly evident as corporate lobbyists skillfully exploit the renewed emphasis on industrial competitiveness to push for deregulation, corporate-friendly rules, and financial handouts. As the American academic Vivek Chibber writes, “Businesses understand industrial policy as the socialization of risk, while leaving the private appropriation of profit intact.”

Or as Angela Wigger, professor at Radboud University, states, the “EU industrial policy is yet another instance of offensive capitalist restructuring, primarily to the benefit of financial and productive capital, without any notion of profit sharing for labor or the creation of common goods accessible to society at large.”

Furthermore, the lobby battles waged over the Artificial Intelligence Act are a prime example of how the obsession with competitiveness is undermining alternative visions to Big Tech’s power, instead benefiting corporate giants.

The European Industrial Deal: Deregulation in Disguise

In February 2024, a select group of 60 CEOs and leading EU politicians, including the President of the European Commission, Ursula von der Leyen, met at the BASF chemical plant in the port of Antwerp—an enormous industrial zone responsible for 10% of Belgian CO2 emissions.

The lobby battles waged over the Artificial Intelligence Act are a prime example of how the obsession with competitiveness is undermining alternative visions to Big Tech’s power, instead benefiting corporate giants.

At the closed-door event, CEOs of the most polluting and toxic corporations in the world issued the ‘Antwerp Declaration for a European Industrial Deal.’ The Declaration reads like a long wish list of the European industry.

It calls for “eliminating regulatory incoherence,” a “competitive and sustainable tax level across Europe,” as well as the removal of “permitting obstacles” and letting “entrepreneurship thrive.” The Declaration testifies to a deeply deregulatory and neoliberal agenda aimed at removing “annoying” obstacles, such as social or environmental regulation. Since then, the initiative has gathered steam, with almost 2,000 companies and business associations endorsing the Declaration, thereby pushing competitiveness to the top of the European political agenda.

Furthermore, a less publicized lobby event took place just a day later at the Museum of Fine Arts in Brussels, organized by the tech lobby group, DIGITALEUROPE. The event was attended by the Belgian Prime Minister, Alexander De Croo, and a number of high-level policymakers from across Europe. During his keynote address, De Croo emphasized that the end of the parliamentary mandate provided a great opportunity to set the agenda for the next five to 10 years, with a strong focus on competitiveness.

Monopoly Power for the Sake of Competitiveness

In parallel with these corporate-led initiatives, the European Commission has tasked former Italian Prime Minister Mario Draghi to produce a report on boosting the EU’s competitiveness. The report is expected to have a large impact on the agenda of the next EU Commission which will take office at the end of 2024.

Despite the report’s importance, Draghi has mainly been meeting with industry representatives, such as the influential industry groups, European Round Table for Industry and BusinessEurope. Meanwhile, he only met with trade unionists once, while many civil society groups have not even been consulted.

The privileged access of business interests to Draghi is already cause for caution, but Draghi’s speech in La Hulpe on 16 April 2024 has further raised serious concerns. For several sectors, such as defense, energy, and telecom, he proposed allowing market consolidation to help Europe become more competitive in world markets. These so-called “European champions” would be subsidized with public money, without any wider public interest goals such as environmental protection, fair taxation, or labor rights attached.

As a group of civil society organizations has noted, “An increasingly influential vision for Europe’s future rests on a narrowly defined vision of ‘competitiveness’ which foresees creating ‘European champions’ able to compete on the global stage. […] Their solution […] is to slash regulation while using subsidies and other public measures to help already powerful corporations grow even stronger.”

How European Startups Teamed Up with Big Tech to Gut the AI Act

What does all this mean for the EU’s digital transition, a key part of its industrial agenda?

The EU has claimed to rein in Big Tech’s monopoly power with the Digital Markets Act (DMA) as its centerpiece legislation. While impressive, the DMA does not fundamentally alter Big Tech’s economic power, rather it tries to limit the worst excesses of that power shown in the past decade. Moreover, among some influential policymakers in Member States and the European Commission, such as the omnipresent Commissioner Thierry Breton, these initiatives are mainly seen as part of a quest for “digital autonomy” through support for European tech champions.

These so-called European champions would be subsidized with public money, without any wider public interest goals such as environmental protection, fair taxation, or labor rights attached.

Moreover, the limitations of the DMA became apparent during the heated negotiations on the EU Artificial Intelligence (AI) Act. In December 2023, after 36 hours of excruciating behind-closed-doors negotiations, the European Parliament and Member States reached a final deal on the AI Act. But while the details of that deal remained murky for weeks to follow, it quickly became clear that the developers of the most advanced AI systems, that is, the Big Tech companies, had scored a major win. The development of general-purpose AI models, such as ChatGPT will largely escape any obligations under the compromise reached.

While Big Tech companies did play a key role in influencing lawmakers, it was the lobbying by French startup Mistral AI—produced by OpenAI but funded and commercialized by Microsoft—and the German startup Aleph Alpha, that tipped the scales. These companies had privileged access to the highest levels of decision-making, leveraging the two Member States, France and Germany, to dilute requirements on developers of general-purpose AI.

A key argument of Mistral AI and Aleph Alpha during those negotiations was that the AI Act would kill innovation, make a “sovereign” European AI industry impossible, and hinder “creating European champions.”

In February 2024, just a few months after a compromise on the AI Act was reached, Mistral AI caused public outcry by announcing a partnership with Microsoft. In this partnership, Microsoft would invest 15 million Euros, and Mistral AI’s models would be trained and distributed on Microsoft’s servers. This arrangement was similar to Microsoft’s deal with OpenAI, although on a much smaller scale at this stage.

In defending the deal, the French Finance Minister Bruno Le Mair only further underlined the hollowness of the European champion narrative. “This week’s Mistral-Microsoft deal is an example of France’s take on ‘technological sovereignty,’” he claimed.

The Future is Public

The misguided quest to build European champions doesn’t only undermine much-needed regulation, it also ignores key questions about economic power and ownership, while obscuring real alternatives to Big Tech’s toxic business models.

Big Tech companies are rapidly entrenching their monopoly power in AI markets. Microsoft, Google, Meta, and Amazon are spending billions of dollars in partnerships with AI ‘startups’ or by building AI models themselves. But even more fundamental is the infrastructural power Big Tech has in terms of computing power, the enormous amounts of data it appropriates, and the monopoly it holds over the cloud—key building blocks in developing AI models. The Mistral AI-Microsoft deal is a clear manifestation of that power and shows the improbability of building European alternatives in a monopolized market.

Building alternatives will require more fundamental actions. It requires the break-up of Big Tech’s monopolies, regulating large cloud computing as public utilities, and extensive funding for public alternatives that prioritize the common good.

However, there are alternatives to a market either dominated by Big Tech giants or one tailored to the interests of European champions. As Amba Kak, Co-Executive Director of the AI Now Institute, said, “The solution is also not merely to create European national champions instead, rather to invest in a decentralized, and resilient national innovation ecosystem that goes where the current AI industry is not incentivized to go on its own.”

These remarks are echoed in a recent piece by academic Cecilia Rekap, who writes, “Regulating the technology is not regulating its monopolization […] Against this backdrop, in which the most likely scenario is that AI will remain controlled by a few US giants, there is an urgent need to offer public alternatives to the for-profit development of AI.”

Building alternatives will require more fundamental actions. It requires the break-up of Big Tech’s monopolies, regulating large cloud computing as public utilities, and extensive funding for public alternatives that prioritize the common good. The EU’s industrial policy should not play to the tune of corporate interests, but should build real alternatives that benefit people and the planet.