Note: I’m taking a break for a couple weeks. In lieu of my own stuff, I’ll be posting excerpts from articles that got me thinking. With occasional input from AI.
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From How Europe regulated itself into American vassalage. The Economist
It wasn’t long after blue jeans, Hollywood blockbusters and Big Macs crossed the Atlantic last century that some worrywarts started fretting about Europe falling prey to American dominance. What was once a concern about cultural hegemony has of late morphed into panic over commercial dependency. With some justification: the commanding heights of the modern European economy have quietly been captured by American firms.
Apple and Google power the mobile phones used from Dublin to Dubrovnik. Other Silicon Valley titans have spawned cloud computers storing Europeans’ data, and from which American artificial-intelligence models are being deployed deep inside the continent’s businesses. Visa and MasterCard, two American firms, are often required for Europeans to pay other Europeans. Increasingly the continent’s lights are being kept on by American liquefied gas, replacing an erstwhile reliance on Russian energy.
This form of economic vassalage, which comes on top of dependency on security matters, is hardly new.
Here is an uncomfortable truth for hand-wringing policymakers in Paris, Berlin and beyond: Europe’s dependency on America Inc is in no small part Europe’s own fault. Decades of over-regulating the old continent’s economy left businesses there unable to compete with American firms, which went on to trounce European ones even in their own backyards. What Europeans could not build quickly for themselves, due to a thicket of regulations, they often imported just as quickly from abroad.
That forcing businesses to jump through endless regulatory hoops would put a burden on Europeans was always understood: meeting ambitious green targets, protecting privacy, preventing bank meltdowns or achieving other necessary goals was always going to carry a cost. But the extent to which it also left Europeans in hock to foreigners—for now mostly America, but also increasingly China—has only belatedly become clear.
Yes, EU rules often applied to American firms, insofar as they wanted to offer their wares in the bloc. But regulation in practice hit European firms harder. The costs of administering complex data-protection rules, say, could easily be absorbed by a Google or OpenAI, with their hordes of compliance staff. Not so their European rivals, which have usually lacked scale (if only because the EU’s fragmented single market made it harder for them to grow beyond their home country). The EU thus generated barriers to entry that often ended up protecting American giants.
The sapping of European sovereignty is also evident in finance… Several thousand European banks once jointly owned a pan-continental payments system (known as “Visa Europe”; its only American element was the name licensed from the global brand). But well-intended EU regulations that capped the sector’s profits made that business unattractive for the banks, which ultimately sold the business in 2016—to the Americans at Visa. Thus a new dependency was born.
Even less whizzy bits of the economy have regulated themselves into subservience to foreigners…A tangle of national and EU rules made it ever-harder to drill [for natural gas]; many countries have given up. Today 85% of all gas used is imported, over a quarter from America.
Other new industrial projects are often unfeasible to launch in Europe. The EU these days frets about access to critical raw minerals, for which it depends mainly on China. Europe has deposits, but getting the environmental and other permits in place to extract them can take up to 20 years, per the EU’s auditors.
The annoying thing is that, taken individually, each piece of euro-regulation is laudable. Yes, Europe should aim for “net zero” carbon emissions by 2050. Of course regulating AI is sensible, lest the robots turn on us one day. Firm antitrust rules enforced by the EU have served consumers well, and so on. But taken together the effect has been a tangle of red tape that has left Europe awkwardly exposed.
A bit more on the path from over-regulation to the increasing dominance of large firms:
Large firms are better at regulatory compliance than small firms due to economies of scale, where the per-unit cost of compliance decreases with size, allowing them to easily absorb fixed costs like legal fees and specialized staff… Large corporations can afford dedicated compliance departments, sophisticated technology, and lobbyists to navigate or shape regulations, while small firms often rely on overstretched generalists. (AI Summary)
One way to reduce the burden of regulation on small firms:
Regulatory compliance imposes a bigger burden on small firms than on large firms. This burden impedes growth for small firms and makes them vulnerable to failure. Only 50 percent of small firms remain in the market after five years, and only 35 percent survive for 10 years. Research shows that regulations are associated with a higher failure rate for small firms, but not for large firms.
Easing the regulatory burden placed on small firms would improve their financial position and reduce their risk of failure. However, to create a level playing field, and to make it more likely that small firms can grow and provide greater competition to large firms, it is also necessary to change policies that give small firms the incentive to stay small.
To help small firms, policymakers should adopt policies that lighten the regulations imposed on them from techniques such as regulatory tiering and exemptions. As firms grow, they face increasing regulatory burdens as these benefits are phased out. The prospect of facing higher regulatory costs can give small firms the incentive to stay small. Studies show that, if one looks at the size distribution of small firms, a disproportionately large number are just below the threshold at which they would lose regulatory relief if they expanded.
The results suggest that policy makers should be concerned not only with the burden that regulations impose on small firms, but also with how quickly their policies increase the burden as firms grow… Specifically, they should design flatter regulatory tiers that allow small firms to reach the economies of scale in regulatory compliance enjoyed by large firms…Lowering the regulatory compliance costs for small firms is an important goal, but to allow small firms to compete on a level playing field with powerful corporations, it is necessary to eliminate the regulatory hurdles they encounter along the way.
References:
How Europe regulated itself into American vassalage. Charlemagne / The Economist April 22, 2026
Public Interest Comment on Laws and Regulations That Raise Barriers to Competition. Mary Sullivan/ George Washington University Regulatory Studies Center May 28, 2025