I know I haven’t written much about the American Challenge for a while, but as I read through the book I realized most all of my critiques would be retreads of what I had already said.  In the end, Jean-Jacque Servan-Schreiber’s thesis was made clear from the outset: Europe was falling behind in technology and economics and his preferred cure was Eurofederalism.  As an aside, some of my American readers might not know what Eurofederalism is, it’s basically the idea that Europe (the EU to be more specific) should continue forming an ever closer union between the states, such that political and economic power rests more and more with the supranational EU rather than the nations themselves.  Exactly what the end goal of Eurofederalism is varies from person to person, some people envision a United States of Europe, some want more federalism, some want less, but most would agree that the current amount of cooperation is not enough.  

With Servan-Schreiber’s thesis laid before us, it’s tempting to look back and try to judge how right he was.  On the one hand, I can see all his arguments from 1968 being made today in 2022: Europe still falls behind in certain sectors to American multinational corporations, and many Europeans still think the cure is Eurofederalism, so it’s tempting to call him a true visionary who noticed these things well before others did.  On the other hand, many of the problems he identified from 1968 were solved by Europe without the kind of Eurofederalism he envisioned.  University graduation steadily climbed in Europe to reach the same highs it did in America, Europe’s growth rate climbed so that America never outpaced it to the extent he though they would, and although Europe does not control many of the tech companies of today, they still have not missed out on the productivity gains that tech has brought because buying a computer is still as good as building in yourself.  Perhaps the Four Freedoms on the EU have helped Europe reach this point, but it’s clear that a common, EU-wide industrial policy was not necessary to maintain Europe’s economic growth in the face of American corporations.In the final tally, I do believe Servan-Schreiber was prescient for his day, identifying key weaknesses in the European economies and key strengths in the American one.  But in other ways he was wide of the mark, many industries he wanted to throw money at are not the ones building the future, and his preferred answer was not necessary for Europe to “catch up” in many ways to America’s standard of living.  Overall though, a very enjoyable read: 8/10.

I’m still going through The American Challenge by Jean Jacque Servan-Schreiber, the 1968 book which opines on what Europe needs to do in order to not be economically dominated by America.  A consistent theme for Servan-Schreiber is that European governments should direct investment towards key industries which he thinks are important for the economy of the future.  In some cases he was incredibly prescient, he urges Europe to invest in semiconductors and computers years before they hit the mainstream.  In other cases he seems woefully misinformed, claiming that all future air travel will be supersonic and the Concorde will be surpassed by American supersonic planes.  And in some places he’s oddly silent, saying little to nothing about the future need for renewable energy and global reductions in carbon.

Now of course, he shouldn’t be dismissed for not correctly predicting the future, should he?  Who knew that supersonic flight would never take off?  And how accepted was the idea of global warming in 1968?  Yet this is exactly my problem with his economic model, he can’t predict the future, and no one can.  So his claim that the cure for Europe is to decide which industries are “the future” and invest heavily in those industries above all others doesn’t strike me as very sensible.  Instead of the government choosing which industries to invest in, why not create an economic system which allows good industries to start up and flourish?  A government is by its nature a centralized organization, and that centralization comes with both costs and benefits.  Notably, the people directing the government’s economic investments can’t always be experts in every industry they want to invest in, it’s just not possible for a few hundred government workers to include an expert in everything.  So what if you panel on government investment doesn’t include anyone familiar with computers?  Do you pass the idea up?  And what if your panel does include “experts” in cold fusion, do you redirect all efforts towards a futile project?

This to me isn’t an idle criticism, I don’t think a centralized entity can replace a decentralized market with the same kind of efficiency.  I’m not some harebrained anarcho-capitalism mind you, I’ll try to write later about where the government should get involved, but the maxim of “the government shouldn’t try to choose winners and losers in the market” is one I think has merit, the government just can’t be expected to have enough people and enough breadth to be an expert on all the decisions a market can make.

I think there’s more to this “can’t predict the future” argument too.  Servan-Schreiber has what I have called before a “Sid Meier’s Civilization” view of technological progress.  In essence, this viewpoint is that technology costs a certain amount of “something,” be in money or man-hours, and once you discover a technology it’s yours to use while your opponents don’t have it.  Technology thus progresses as a race where countries need to either catch up to the techs their opponents have (by spending money and man-hours) or find new techs their opponents don’t have (so they can have a decisive advantage).  The problem with this view is that there are many technological paths that prove to be a dead-end where you’d have been better off not spending your resources, and we don’t know which are dead-ends beforehand.  I said last week that the Concorde jet was one such dead-end, it costed billions of dollars with not a lot to show for it, and that was money that could have been invested in the NHS or other government services.  The idea was that if we just keep pouring money into Concorde, eventually we’ll create supersonic flight and it will be just as profitable and useful as we’ve always dreamed it would be. Or at worst we’ll learn a lot of lessons about what we need to do in order to create profitable supersonic flight and our next project will be the one that works.  That wasn’t the case, it turned out supersonic flight just couldn’t compete with moving a massive amount of people slightly more slowly.  Another dead end would be fusion power, an area where we still don’t know if we can do it with modern tech let alone tech from the 20th century.  Many many people predicted that fusion was The Future, and urged governments to invest in it.  But fusion wasn’t the future and it’s probably a good thing that a lot of money wasn’t spent on it.

You can’t predict the future, so a government can’t reasonably be expected to know which opportunities to invest in and which to avoid.  A market uses the wisdom of crowds to decide, and so can be relied on to provide at least some of the efficiencies a government board lacks.  It’s easy to look back 50 years and say “if only Europe had invested more in computers!  We could have had European versions of Apple, Google, Microsoft and Amazon!”  But it’s hard to sit where you are today and decide which of the many investment opportunities are “the one” to invest in.  For example, if Europe should have invested in computers in the 60s, what should it invest in right now?  What is the game-changing area, with returns equal to or greater than the computer industry of the 60s, that Europe should throw all its money in?  3D printing?  Genetic modification?  Robotics?  What is the “investment of the future?”  I’d hazard a guess that no one can agree, and so it’s probably better to rely on the wisdom of the crowds than the political decisions of a government.

As readers will know, I’ve been reading The American Challenge by Jean Jacque Servan-Schreiber, a book written in 1968 about the problems Europe will face competing economically against America.  It’s always a joy reading through old books and seeing their predictions for the future, and while this book has definitely been a doozy as we’ve seen, I feel the author was WAY off was his predictions about supersonic flight and the French/British Concorde jet.  At a glance the Concorde venture seems to be an example of exactly the kind of public/private partnership that Servan-Schreiber says will be necessary and useful in the economy of tomorrow.  I didn’t take note of it but in discussing the “post-industrial” economy of future-America, he envisions that “private enterprise may no longer be the major source of scientific and technological development” and “the free market may take second place to the public sector.”  Essentially he envisions even the governments of capitalist countries taking on more of the burden of economic risk and development.  He even lays this out as part of why American companies are so successful: they grow to a sustainable size and then get big government contracts that launch them into international relevance.

Yet for all that, Servan-Schreiber spends most of his time griping about how the Concorde is an inferior product to what he expects Boeing will produce with the 2707.  He lays out all the ways Concorde has fallen behind: the Boeing will use titanium because an American public/private partnership has made that economical, and the Boeing will use a swing-wing design which the Concorde’s engineers in their risk-aversion did everything in their power to avoid.  The Boeing will even carry almost twice as many passengers as the Concorde, so while Concorde will get to the market first, Boeing will certainly gobble up its market later with a better, more efficient plane.  All in all, the author claims that Concorde will be the last plane of an old era, perhaps in service no more than 10 years, while the Boeing 2707 will be the first plane of a new era with a longer lifetime and much more to build off of design-wise.

My older readers will already be chuckling.  The Concorde lasted a quarter of a century from 1976 to 2003, while the Boeing 2707 was canceled before Concorde even entered service and Boeing never released a supersonic passenger jet.  Yet Servan-Schreiber’s griping about Concorde may have been vindicated for the exact opposite reason he envisioned: because the future was not supersonic.  The Concorde, for all its technological marvel and prestige, was regarded by the private sector as little but a technological boondoggle.  It costed about 2 billion pounds in R&D and only 20 were ever made.  Inflation adjusted, the tickets for a New York to London flight would cost about 13,000$ today, and they’d have almost zero amenities since every ounce of weight needed to be saved.  You were paying super-premium prices for economy class seats, and no recliners!  To the private sector, the Concorde was a failure and no supersonic passenger jets have followed it.  It was a government prestige project built partly on fear of missing out and losing to the Americans, and was sustained even after the Boeing 2707 was canceled due more to political than economic arguments.  The amount of investment never justified its return, and if you traveled back in time to tell Harold Wilson’s Labour government what it’s future would be, he might have been justified in dumping all that Concorde money into the NHS instead. The Concorde was an example of exactly the kind of public/private partnership that Servan-Schreiber thought Europe needed more of, yet most of his gripes were that the French and British weren’t playing nice with each other and they needed more unity to make the thing work. 

But alas, the future was not supersonic, the future was 747.  The Boeing 747 was introduced in 1970, over 1500 have been produced, and it still flies today.  And the development costs were comparable to the Concorde, total cost of 3.4 billion dollars for the 747 (in 2004 dollars) vs 2 billion pounds for the Concorde (in 1976 pounds), if someone wants to check my math with the inflation and conversion go ahead, but that looks pretty comparable to me.  And in some ways Boeing did succeed for a few of the reasons Servan-Schreiber defined, they had more capital than their European competitors, and better access to management and technology that would allow for big developments in engineering and design.  Having a bigger number (the biggest plane, or the fastest plane like Concorde was) is very important for national prestige and so always invites government investment, but sometimes just making something good and economical is better, and from 1970 to today American companies have been very good at doing just that.

In my continued posting about Jean Jacque Servan-Schreiber’s The American Challenge, written in 1968. We have come to the part in the book where he lays out why he thinks Europe fell behind economically by his time period. We have already seen that American Companies are seen as more dynamic, with higher profits, larger investments, and a larger educated cadre of workers to hire. For all these reasons, Servan-Schreiber claims that rather than being a boon to European business, the 1960s forerunners of the EU such as the EEC (European Economic Community) and others are simply being a boon to America. Now instead of needing to have different branches in each country, an American company can set up a single European branch and export its products to the whole EEC. American companies can take advantage of these efficiencies while European companies, still struggling with lower profits and less educated workforces (says Servan-Schreiber) are outcompeted. In short, Servan-Schreiber says that since the beginning of the EEC, the economic gap between America and Europe has only gotten wider.

One of his greatest laments appears to be a very modern one, that despite the supposed economic union, each European country continues to pursue its own goals and directives completely divorced from the others. The demand for unanimous rather than majority voting means that nothing can be done which is unacceptable to any state, and this means that all controversial problems are shoved to the side while the nations of the EEC continue to do their own things. Even when the nations do try to work together, he claims they spend most of their time arguing to ensure they each get a fair share of the money in the pot, rather than actually trying to get something done. He even claims that despite the common market for European Coal and Steel being the very first of the EU/EEC pan-European institutions, “by 1968, there is no longer a common market for coal and steel.” Each nation is busy protecting its own industries and the capital markets are completely divorced from each other. So a German or French industrial company operates almost entirely within their own nation, while an American industrial company will operate not only in America but in all the nations of the EEC as well, gaining an economy of scale benefit that EEC countries lack.

In short, Servan-Schreiber is a Eurofederalist.

As blithe as that statement may be, it feels an accurate one from my reading of him. He does have some other kooky ideas to be fair, he speaks about a future where each European state commits to specialization in a few areas “in the Sweden or Swiss model,” and to spend their resources prudently in only these areas, but that seems like a fantasy with a bad outcome. If Germany decides to specialize in cars, who’s to say their cars will always be the best? Why shouldn’t German cars face competition from Italian or Swedish cars that are also quite good and have investments from their own governments? But a few kooky ideas aside, his main point seems to be that the current European unity is an illusion, and Europe needs real unity in order to compete with the United States.

In some ways this may be oddly prescient. Remember the earlier chapters in which Servan-Schreiber made dark predictions that America would skyrocket past Europe economically? How Europe would be reduced to a near colonial status while America enjoyed unimaginably higher standards of living? Yeah, none of that actually happened, America and Europe are still close together in economic standards of living. I’m no historian, so I can’t tease out the cause and effect, but how much of this was caused by the EU itself? The EU is after all a Eurofederalist’s dream from the perspective of 1968. A truly common market where selling across borders in Europe is no different than selling across state lines in America. Add to that the prodigious increase in college educated workers that Europe gained during the 20th century, and it seems like perhaps Servan-Schreiber’s dark predictions did not come to pass precisely because Europe took the steps he suggested to mitigate them. It’s food for thought at least.

As I’m going through The American Challenge, one of the most fascinating aspects is the prescience (or lack thereof) the author and others had for computers. This book was written in 1968, and yet already computers were identified as a factor which would accelerate the economy of America, perhaps even launching it past Europe. It’s no secret that of the 5 largest companies in the world today, 4 of them are American tech companies (Apple, Microsoft, Google, Amazon). The computer has been good for America, and it’s intriguing to see that having been predicted so early on.

The author envisioned the computer as thrusting America into a “spiral of progress” during the 1980s (which could roughly be seen to coincide with the development of home computers). The author even predicts an “information technology revolution” in which computers would be integrated into nearly every facet of the economy and culture of society, since their transformative power to replace human calculation and information retrieval is by no means limited to the hardest math problems or most complicated queries. The author does however repeatedly assume that this economic revolution will lead to a shrinking work week, which hasn’t happened whatsoever, American workers have continued to be more productive just as the author predicted, but we haven’t reaped all the rewards of that productivity.

The book goes further in sharing a speech from William Knox, of the Office of Science and Technology for the White House. In it he predicts:

• Computers of 1980 will be a thousand times smaller than 1968, yet will be capable of a billion operations per second (Moore’s Law)
• Computers will be small, powerful and inexpensive. They will be no more difficult to learn how to use than a car
• Computers will perform processes in “real time,” they will be capable of all performing all their functions without having to wait for the insertion of punch cards
• Computers in 1980 will be able to store all the written contents of the world’s libraries, and retrieve them on demand
• With the help of satellites, computers will be able to link people together from different continents to send data back and forth almost instantly
• Images will be able to be transmitted alongside text messages. (Cat memes are not far off!)
• By 1980, American schools and colleges will have computers in them, not only to help organize the students but for the students to use as well

Now, he does stumble with some of his predictions, he thinks that we would soon interface with our computers primarily by voice whereas even today I don’t trust Amazon Alexa or Google Assistant to understand me more than 7/10 times. However overall the insight that computers would be part of the next technological revolution was not far from the truth.

But of course, these things didn’t lead America to completely overtake the European economies like the author and others expected, and I think part of it comes down to this: while producing computers is good value for money, consuming them is as well. It’s true that most facets of the modern computer industry are controlled by American companies, if you want to buy a personal computer chances are it will be American branded. But inventing and producing computers isn’t necessary to gain their benefit. European non-tech companies also saw massive productivity gains by buying computers and integrating them into their systems. As I said in part 3, it seems like the education gap between Europe and America was closed sometime in the 20th century, and once that happened the benefits of the computerized economy were available for European companies and workers as well, without having to continue importing American managers and American technicians as the author had expected. In short, the computer revolution occurred, but its effects were much more evenly distributed than the first industrial revolution, perhaps in part because computers themselves are so efficient at transmitting information.

On a final note, one thing William Knox said struck me as prescient both for his time and for our own. He spoke of how computers would so completely transform our communication, that we may find it hard to even communicate with people who don’t have access to one, and those people may be left to the side of the wider global communication network. I think this is still true today, for people who socialize on the internet, those who aren’t on the internet aren’t really part of the culture and their voices aren’t heard. If you don’t have a computer or don’t use one, you’re basically muted from much of the wider culture of today, totally unheard except in extreme circumstances.