Why Europe Is Losing the Race to Develop New Technologies

DUSSELDORF, Germany — Pop into any personal computer store here in Germany’s fashion capital and you’ll see a superb selection of IBM, Apple and Compaq machines, as well as the latest software from Microsoft, Lotus and Borland auf Deutsch.

Sure, there are computers from Olivetti and printers from Mannesman, but how well do they sell? Herr salesman just shrugs. His silence is eloquent: Germany’s digital bestsellers today are Japanese hardware and American software.

Want to install an ISDN telecommunications switch for your global branch here? Never mind what it is, the Bundespost--the Ministry that tightly regulates German telecommunications--says you may have to wait six months. Leasing a high-speed pan-European telecom link runs more than five times what it costs to acquire the comparable capacity in America. There’s even some uncertainty over whether it’s technically legal to plug a U.S.-made laptop into the telephone lines without Bundespost approval.

All this goes a long way toward explaining why Germany lags well behind France and England in quantity and quality of computer networks. Germany’s famed Mittlestand-- the mid-size companies that are the backbone of the country’s technology export success--simply have to pay far more for far fewer choices if they want to invest in digital communications to improve their competitiveness. Perhaps this accounts for industry’s Technikfeindlichkeit-- the German idiom for the antipathy for technological innovation.

Fly an hour to London and you’ll find an improved but still foggy technological climate. The computer shops are stuffed with the Japanese-American combination--but the U.K. does have a thriving, if domestic, software development industry. The natives are particularly thrilled that many of “Jurassic Park” ’s digitized dinosaurs were compiled in code written by a small London software boutique called Parallax. Parallax employs all of six programmers.

As for British telecommunications, while deregulation and privatization of British Telecom have given Britons more choices and lower prices than even three years ago, the telecommunications infrastructure is still far inferior to what exists in America. For example, features such as call waiting and call forwarding have yet to be seriously marketed.

As the entire Continent lingers in the worst recession since the end of the war, Europe has come to the painful realization that it has failed to hold its own as a developer and distributor of value-added technologies. Its indigenous computer, semiconductor, consumer electronics and software industries are a collective mess.

In terms of price and performance, its technology infrastructures are simply no match for those of its greatest industrial rivals--America and Japan. Where European Community-wide industrial policies and the economies of scale offered by a single market were supposed to ensure Europe’s technological competence--if not preeminence--virtually every single EC high-technology initiative--from Esprit in information technology to analog HDTV (with the notable exception of Airbus) has been an unambiguous failure.

These failures have made European industry and political leaders exceedingly nervous. The recession has forced them to reconsider options that were politically unacceptable even two years ago.

Initially, telecommunications was one of only two industries exempted from the EC’s push for a single European market. A special Green Paper issued just a few months ago now calls for “harmonization” of telecommunications practices and protocols.

But realistically, how long will it take for the Bundespost to get along with British Telecom? Europe’s telecom technocrats are understandably terrified that technologically superior foreign companies will demand access to a market that’s predicted to grow to more than $300 billion by the end of the decade. After all, if British Telecom can invest $4 billion in MCI, why can’t AT&T; or NTT (its Japanese counterpart) make a major move onto the Continent? Europe’s best hope is in influencing global technology standards, not trying to use them as tools for protectionism.

The new European reality--now quietly acknowledged but seldom discussed--is that European technology policy as an engine of economic growth is effectively dead. Indeed, European technologists are now more concerned about survival than competitiveness. Macroeconomic issues such as interest and exchange rates now overwhelm any technology discussions. The Euro-recession here is so painfully deep that instead of acquiring Sherpas to prepare for the Tokyo summit, Europe’s leaders sought out spelunkers. Of course, many Europeans are afraid that the political and ethnic strife highlighted by Bosnia-Herzegovina overshadows any economic and regulatory concerns raised by the Maastricht Treaty.

In other words, where technological innovation was once seen as a medium of economic growth and renewal for an integrated Europe, it’s now being treated as yet another symptom of the Continent’s inability to compete. Technology has gone from being a source of optimism to yet another good reason for Euro-pessimism.