Europe stared a technological revolution in the eye and chose regulation. As artificial intelligence (AI) became mainstream and tech companies became economic powerhouses for their countries, European regulators scrambled to devise schemes that slowed and limited innovation. As a result, the European tech industry is far behind that of other world powers, and companies are hesitant to operate and develop within its borders.

The Wall Street Journal explained the European tech market in the context of the global one: “Only four of the world’s top 50 tech companies are European, despite Europe having a larger population and similar education levels to the U.S. and accounting for 21% of global economic output. None of the top 10 companies investing in quantum computing are in Europe.” Entrepreneurs, innovators, and investors show little interest in what the European tech market has to offer. In contrast, investment and progress in the American tech industry is growing rapidly. Similarly, China has approached technology and AI in particular with a competitive rigor-prioritizing progress and expansion.

The European culture of regulation cannot keep pace with the fast-moving world of technology. By the time regulatory hurdles and bureaucratic mazes have been deciphered, the demands of the market have moved onto the next thing. Companies in Europe have to dedicate large amounts of time, resources, and manpower to compliance measures, taking valuable dollars away from innovation.

While the regulatory systems in Europe are both abundant and overlapping, a few in particular have hindered European companies as well as American companies hoping to operate within Europe. The Digital Markets Act, the AI Act, and the Digital Services Act are among the most egregious.

The Digital Markets Act labels certain online platforms as “gatekeepers” and handicaps them in order to create a more “fair” playing field. The law has been in place since 2022, but its punitive approach was highlighted by recent fines. In April of this year, American companies Apple and Meta (both designated as gatekeepers) were fined millions of dollars for violating the rules of the DMA, designed to make them less competitive.

Similarly, the AI Act is being implemented right now. The AI Act became effective last year and once fully implemented will require all AI used within the European Union (including foreign AI) to adhere to extensive regulations and compliance checks throughout all phases of the development and use process.

The Digital Services Act operates under a similar philosophy: big is bad and the government knows best. European bureaucrats determine which speech is allowed, and in turn, platforms must answer to those bureaucrats’ dictates and remove and censor any speech deemed inappropriate or hateful. The censorship regime that results is the opposite of free speech and antithetical to many free speech and open discourse focused platforms’ approaches.

While America leads the world in technology and still boasts a respect for the free market and free speech, the current American regulatory landscape is in no place to cast the first stone. Over a thousand state AI bills have been proposed and overlapping regulatory measures on new and emerging technologies are in legislatures across the country. The European approach to regulation of both AI and social media has proved unsuccessful, with a lagging tech market and a culture of fear to show for it. Avoiding the punitive bureaucracy of the European Union requires a culture that respects the free market, trusts the consumer, and honors both free speech and innovation.

Links to Learn More

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small – WSJ

GDPR & European Innovation Culture: What the Evidence Shows | by Adam Thierer | Medium

The French Leave (Overzealous Regulation Behind) – Pelican Policy