The recent controversy about the appointment of the chief economist in the part of the EU commission that deals with competition is instructive. And not in a good way. DG Competition wanted to appoint a US citizen to the post, Dr. Fiona Scott Morton, who is a distinguished professor at Yale and has been advisor to many US IT companies such as Apple and Microsoft.
There was uproar, and Ms Morton pulled out of the appointment. But people have missed the point. The outrage of France in particular was confused by President Macron’s diversionary question, asking didn’t we have any suitable Europeans, and wasn’t it a problem if we didn’t. He also suggested he would be happy with the appointment if a European would get a similar job in China or the US, as if nationality were the key issue and could be resolved by some kind of international trading of posts.
Many people pointed to the expectation that, once in the job, the new chief economist would have to recuse themselves from most decisions, because of having worked with so many of the companies that are likely to be involved. This is also true, but again is missing the big point. The controversy was further confused by the many eminent economists who rallied to Ms Morton’s support, emphasising what a great economist she was. Obviously true, but once again missing the big point.
So what is the big point? Well, it’s this: the perspective on industrial policy that the EU has or should have. Most western economists, and all US politicians take the view that the state should not intervene unless there is clear market failure. Let the market decide. If there are big mergers, let’s see how they would affect market competition. And that’s it. But the EU, through the detail, scope and frequency of its legislation, is on a different tack. More like “the state should intervene unless it can be shown that the market is functioning properly”. That’s a big difference. The conventional view says that unless you can show that the market is not operating fairly, we should leave it alone. The radical view, which is driven by technological and geopolitical change, says that today’s market is not tomorrow’s and we need to get ready for the latter. That’s the priority. This implies not spending too much time on elegant analysis of what will soon be yesterday.